Part-time rehabber looking for advice on how to to pursue this as my full-time job?

I live in Chicago and have been buying and rehabing residentail (a couple of condos and a four flat unit) properties in Lincoln Park / Lakeview over the past 5-6 years and would like to pursue this as a full-time business.
I have done very well so far doing this part-time. I have bought palces ranging from $450k - $1.0m that need work, i do most of the work myself and always put in high end finishes (i.e. anywhere from Jenn-air to Subzero, etc.). I have been living in them and selling after two years to avoid capital gains taxes, my credit score is excellent.
what do i need to know if I am going to quit my day job and do this full-time? Questions i have are:
How much of a down payment will i need (been doing 20% in the past and could document my income)?
How much will a no-doc loan impact my interest rate?
What are the tax implications?
Would i be better off doing it under my own name or under a business? Why for each?
any other risks or issues I am not thinking of?
In General Area - Asked by Ron W. - Aug 28, 2009
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Gregory G.
San Francisco, CA

Are you eating up the whole 250k deduction? Sounds like you are only flipping one every two years.

Sep 1, 2009
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Ron W.
Lincoln Park, IL

Greg, to answer your question, yes as i am only doing this part-time at the moment, i have only been flipping every two years and on the multi-unit did use the full $250k deduction, for the condo I did not.
I am now thinking of doing this full-time so i would be looking to flip as many as i can and of course wouldn't be able to take advantage of the capital gains anymore.

Sep 8, 2009
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Michael L.
Victoria, TX

I wouldn't worry as much about the taxes as I would about the way dealing with the banks changes when you change to full time with no other source of income, because it does change. The rates you get, regardless of your FICO, will be more, and qualifying will be harder. If you're only flipping, you may want to do some buy and hold to add other income before you quit your job. Maybe buy multi-unit to live in and receive rents. Then, refi with cash out everything while you have your job, then go full time. Or buy something larger with lots of write-offs that you can lease purchase unit by unit to buyers to spread the gains over a longer multi-year basis. As long as you keep your pace of buying and renovating to keep your write-offs high enough to offset the passive income, you'll do fine.

Sep 28, 2009
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Stephen F.
Lender/Mortgage Broker
Maple Shade, NJ

Are you talking residential or commercial rehabs as a full-time gig? If you are talking residential I have a very good lender for you to talk to that can help you maximize your cash flow and teach you as you get better. I would suggest setting up an LLC for the business to protect your assets. Tax implications you need to ask your CPA, don't take advice from a non-CPA. Loan rates will vary but look at the 11-16% range with points and fees in the 4-5 points area.

Dec 4, 2009
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