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Want To Flip A House? Read This First.




We’ve all seen those TV shows in which a house flipper buys a neglected house, slaps some fresh paint on the walls, stages it like a boss, then flips it back on the market, where it sells at lightning speed and the flipper is tens of thousands of dollars richer for all his or her cleverness.

Maybe ― just maybe ― those shows should carry a disclaimer for the audience: “Don’t try this at home.” House flipping ― in which you buy a house, fix it up and resell it quickly ― isn’t an easy-money highway. And you really do need to know what you are doing.

An ATTOM Data Solutions U.S. Home Flipping Report shows that 207,088 U.S. single-family homes and condos were flipped in 2017, the highest level since 2006.

Completed home flips in 2017 yielded an average gross profit of $68,143 (the difference between the median purchase price and the median flipped sale price), which was up 5 percent from an average gross flipping profit of $64,900 in 2016.

But still, house flipping isn’t for everyone.

While it may sound great to be able to brag about how you bought a house for $250,000 and flipped it for $300,000 six months later, not all of that $50,000 will wind up in your pocket. Beyond the expense of materials and labor that you incurred to fix up the house, there are costs you can’t readily see. Here are nine of them:

1. Closing costs and capital gains tax.

Typically, the real estate agents involved in the sale of your flipped house will take 5 percent to 6 percent of the sales price as their commission. So, if you are selling the house you fixed up for $300,000, you can expect to fork over $18,000 of that $50,000 gross profit.

And if you do make a “profit” on a flip (which is the whole point, isn’t it?) and have owned the house for a year or less, you will be taxed on your short-term capital gain. And short-term capital gains are taxed at your ordinary income tax rate instead of being capped at 20 percent, as are long-term capital gains.

2. The costs of borrowing money.

There are, of course, the costs of improving the house; nobody really just slaps up some paint and sells a home at a significant profit. Construction work and remodeling take time, can run over-budget and may require permits. All the while, you the flipper are the one paying a mortgage and property taxes on it ― and maybe even another loan to cover the costs of the remodeling work. To borrow money means paying interest on it, plus the costs involved in applying for these loans.

3. You make money when you buy, not sell.

There is a popular saying in real estate that holds if you want a profitable flip, then the deal is sealed when you first buy the house, not at the point of sale. The message is simple: Don’t overpay. And one place you overpay is when you go to borrow money.

Traditional lenders for house flippers will want a heftier deposit than in the noncommercial market. You will likely be asked to put at least 25 percent down. A lender who is willing to give you a short-term mortgage to buy and rehab the home will base it on the value of the asset and may not care all that much about your credit score. But he or she will charge 10 percent to 15 percent interest or more. You may find a private lender who trusts you enough to give you a loan for acquisition and repair costs at a more reasonable rate, but that often takes a proven track record.

And while financing for flippers has become more readily available in recent years, 65 percent of flippers still used cash to buy homes flipped in 2017, according to the ATTOM report.

4. What the bank doesn’t tell you can cost you.

Many homes bought by flippers are foreclosures sold by a bank. Many are priced below market value because they’ve been neglected, and neglect can run deep.

In regular seller-to-buyer transactions, the seller is required to disclose any known problems with the house. Failure to do so could result in lawsuits and might even nullify the deal. But banks aren’t required to provide the buyer with any disclosures of known problems. So you could be buying a house with major problems that will need to be fixed before the house is resold and will undoubtedly eat into a flipper’s profit.

If the price appears to be low for the neighborhood and the house is being sold as-is, a buyer is essentially gambling on what problems exist below the surface. If the buyer is a skilled contractor familiar with construction, it may not matter as much. But for the unskilled buyer who will need to contract out the work, it could be costly.

5. What lurks where you can’t see.

Melissa Oliver, a Coldwell Banker agent in Los Angeles and successful house flipper, noted that a home’s problems may not be limited to what you can see.

“You can’t always inspect for what’s hidden in the walls, like faulty plumbing or termite damage. There could be leaks or corroded sprinkler lines, which add up quickly if you need to tear up a yard,” she told HuffPost.

Oliver noted it’s also important to check out the neighborhood and meet the neighbors, saying: “Inquire about any neighborhood disputes or unusual uses, such as a drug rehab or sober-living home nearby, which could affect the desirability for resale.”

6. The cost of over-improvement.

If you buy a house in a neighborhood where all the other homes have laminate countertops and linoleum floors, you probably won’t get your money back by adding granite countertops and expensive hardwood floors.

A smart house flipper doesn’t over-improve a property but knows what the maximum sales price in the neighborhood is and uses that as a ceiling.

You are not going to sell a house for $500,000 in a neighborhood where everything else is selling for $200,000.

7. You estimate too low.

You may know your way around a toolbox and consider yourself a handy guy. But small do-it-yourself projects don’t prepare you for the scale of remodeling a house under a deadline.

You really can’t estimate what it will cost you to remodel a house until you actually price all the materials. For example, when you estimate the costs of putting in a backsplash of subway tiles, don’t just look at the price per square foot of the tiles but also the costs of labor, grout, special tools, etc.

You will likely develop a strong appreciation for the “measure twice, cut once” rule. Waste occurs on every project, as do delays in getting materials, but knowing at the outset what you will need and when to order it can help reduce it.

8. Time is money.

Every day the house sits unsold, the flipper loses money ― which is why it’s important to have a marketing plan and price the house to sell quickly based on the current market values, not on what your costs were to buy and improve the property.

Inexperienced flippers can get tripped up on this last point, noted Oliver. It isn’t what you put into the house; it’s what the market will bear, she noted.

9. Market timing.

Real estate prices are cyclical and, within that, they are highly localized. It’s critical for a flipper to study and understand the local market.

Everyone’s goal is to buy a home at the lowest price possible and then sell it for a higher amount. There were heady times before the Great Recession when a flipper could buy a house, do nothing to it and then resell it a few months later for a profit. Today, with housing prices flattening, a flipper runs the risk that the investment could go south if he or she waits a year to put it back on the market.

CORRECTION: A previous version of this story misstated the length of time one needs to own a home to avoid incurring additional taxes on short-term capital gains taxes when selling it. It is more than one year, not two.


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4 things kids need to know about money




(NC) Responsible spending includes knowing the difference between wants and needs. Back-to-school season, with added expenses and expectations around spending, is the perfect time to not only build your own budget for the year ahead, but also to introduce your own children to the concept of budgeting.

The experts at Capital One break down four basic things that every child should know about money, along with tips for bringing real-life examples into the conversation.

What money is. There’s no need for a full economic lesson,but knowing that money can be exchanged for goods and services, and that the government backs its value, is a great start.
How to earn money. Once your child understands what money is, use this foundational knowledge to connect the concepts of money and work. Start with the simple concept that people go to work in exchange for an income, and explain how it may take time (and work) to save for that new pair of sneakers or backpack. This can help kids develop patience and alleviate the pressure to purchase new items right away that might not be in your budget.
The many ways to pay. While there is a myriad of methods to pay for something in today’s digital age, you can start by explaining the difference between cash, debit and credit. When teaching your kids about credit, real examples help. For instance, if your child insists on a grocery store treat, offer to buy it for them as long as they pay you back from their allowance in a timely manner. If you need a refresher, tools like Capital One’s Credit Keeper can help you better understand your own credit score and the importance of that score to overall financial health.
How to build and follow a budget. This is where earning, spending, saving and sharing all come together. Build a budget that is realistic based on your income and spending needs and take advantage of banking apps to keep tabs on your spending in real-time. Have your kids think about how they might split their allowance into saving, spending and giving back to help them better understand money management.

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20 Percent Of Americans In Relationships Are Committing Financial Infidelity




Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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7 Examples Of Terrible Financial Advice We’ve Heard




Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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