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Unread 07-22-2007, 08:18 PM   #1
jmmcgorman
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Thinking about quitting Flipping, and Starting Tile

I flip houses for a living, been doing it for a little over three years now. Originally started in residential real estate. That's for the birds. There was a thread recently on this forum about flip that house. All of those tv shows are full of crap. People don't realize what is involved in doing those houses. On Tv they will have a crew of like 30 guys go in and fix the house in 8 days and make 100k and only spend 15k on renovations. I spend 15 to 20k on all of the projects that I do. I only have two employees and help with all the work myself. By the time you buy it, pay for the improvements, pay your employees, actually install good quality products, pay closing costs on the loan, pay the interest on the loan, market the property, sell it, then cover some closing costs, then pay 20% capital gains tax, the profit is not all it's cracked up to be. This process you say 30 days to renovate, maybe more, at least 1 to 2 months on market another 1 to 2 to close, your talking 6 months before you make your money. Say you make 10k on the property, divided over six months, but it is not really 10, its 8 after your capital gains, divided by six. Which means you have to do a lot of them in a year, which is tough to do here in Virginia because the market is in the tank and I have two properties just sitting waiting to sell. One is a spec house costing me over a $1000 a month in interest chewing away my profit till it sells. Now granted there are some properties that you will make more than 10 but you get the idea of what I am talking about. Someone told me that congress is actually trying to pass a law that would take the ability to flip houses away. Anyone who is actually familiar with loans knows that the FHA loan programs have a no flip policy. They will not allow someone to buy a house that has been owned for less than 6 months. The reason for this is because the hacks out there just slap a cheap coat of paint on crap and sell it for a buttload more and innocent people pay it not knowing the better. It is throwing the market for a loop. This is the bandwagon career right now. And to be honest I am possibly thinking about getting out of it. The risk and sacrifice that I go through to do these things right is becoming very stressful and not seeing the type of return that I need.
I had a guy that came in to do my hardwood floors on this last project, he does all my hardwood floors. The guy is amazing, has his estimating down to a science, comes on short notice, and does a great job. I was talking with him the other day about the difficulty in success at this "House Flipping" business that I am in. He couldn't agree more, he does the floors for the majority of the guys around town that do this, which is not hard to believe, we are in a smaller town, and he was talking to me about these guys. The gentleman that does the hardwoods is making over 6 figures a year, and he takes off the month of october. That blew me away! He told me I should get into trade work because there aren't a lot of young guys getting into trades. Everyone young is going corporate. He said all of the older guys are out overworking themselves do death because of it.

I apologize for going on my rant, the purpose of my post is this: Out of all the work that I have done on these homes, I like the Tile the most. I went to the CTEF courses, and loved them. I try to do Tile in every project that we do. I have even done several Tile jobs on the side. I am wanting to know, and I know that people cannot be exact or may not want to share this with me. If not, I would be open to some of you maybe emailing me as to not share personal information with the world. I am wanting to know what type of income is possible owning your own tile company. When you start out, how many guys would you recommend employing? Obviously I would be working myself, at least one more, but would a third be productive (Cut Man?) Or would two employees be too much when I am first starting out trying to get my business going?

I also enjoy painting, but there are a hundred thousand painters in this town, there are very few tile setters, and I like tile, which some people think that I am insane for liking. I already own a $750 tile saw, lots of tools, and wouldn't really need anything other than the name and some marketing to get me started.

Lowes charges $6 per square foot in my area for regular straight lay not including cost of backer, or thinset or grout.
A lot of guys charge 4 to 6 a foot for the labor in this area. I realize that people in california cannot tell me what they are making and me apply that here. But looking for as much help as possible.

Now I realize starting out I am not going to go and make a six figure income. I just didn't realize that that type of money was available in any type of trade work regardless of how long you have been doing it.

I appreciate your time in reading this. Any advice you would be willing to give would be most appreciated!
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Unread 07-22-2007, 08:37 PM   #2
stullis
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If you want to make good money in the trades become a plumber or electrician.
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Unread 07-22-2007, 09:56 PM   #3
Dave Hessel
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The grass is always greener.
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Unread 07-23-2007, 07:19 AM   #4
Tom Tee
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If money and a hands on trade are your only goal, Plumber and electrician IMO are number 2 and 3. The best pay is available in automatic transmissian repair.

All the above in that you that you own the shop.

Whatsoever you do, do with all of your heart.

Around here plumbers and electricians on their own are doing $125k ++

My buddy who has an average automatic trans shop way exceeds that.

As far as flooring;

Stay away from any custom work unless it is very fat and on a time and material basis.

Just doing quality plain vanilla work is where I found the highest dollar to hour ratio. Doing plain vanilla work in the proper manner with all the prep and finishing recommended in many cases moves your job into the custom arena anyway due to the short cut pro's and DIYers do.

Just hate giving myself away w/ custom work for peanuts. I make way more income working in modest homes than when I did high end homes.

tt
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Unread 07-23-2007, 07:52 AM   #5
jmmcgorman
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I appreciate the input on what trades are doing very well. However I am not really sure that Plumbing or Electrical is for me. I guess what I am asking is not which trade to go into, but how the tile industry is from an income standpoint. Tile is the trade that I would want to do, I am just not sure how competitive the salary could be compared to not necessarily just other trades, but anything. I just don't know what type of salary is possible, I realize that it is all variable and it depends on if you are a really hard worker and a go getter. But I mean I don't know if we are talking 30k, 50k, 80k, or 15k. I am just not sure. I know that Gerald Sloan, one of the directors down at the class at CTEF told me that with the right crew a good Tile Company owner could expect around 80K a year. I guess I am trying to get some rough numbers from some people to see if that type of number is truly possible. I realize there are a lot of variables involved. Just trying to get some input specifically to Tile. I really appreciate it.
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Unread 07-23-2007, 10:57 AM   #6
RedRock
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JM,

(Got a first name we can call you?)

My first attempt at tile setting as a part-time career involved hiring 1-2 guys to help, then they ended up doing 75% of the work, and hence, earned 75% of the labor. At tax time, I didn't end up with much in my pocket. However, I managed to reinvest in myself and bought lots of tools and toys and paid cash for it all.

I have since moved and recently started tiling again as a means for making a full time living. But its all me, no employees. I take a little longer than having a crew but my efforts equals my take home pay. I also have a few other skills that earn me some money now and then. The key I have learned in self employment is to keep as debt free as possible so when, not if, the slow times come, you can still live and support your family.

My advise is similar to Tom's. Enjoy what you're doing then the money will come. Will you get rich? Don't know, what amount equals "rich" is up to you. But at least you are in control of what you earn.
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Unread 07-23-2007, 02:39 PM   #7
flatfloor
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Hi JM,
Take a look at this thread http://johnbridge.com/vbulletin/showthread.php?t=15613 It's a long one, some of which you already know.
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Unread 07-23-2007, 03:24 PM   #8
PrecisionFlooring
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Some of the other guys here that focus strictly on tile & stone work might have a better viewpoint than me as I do all hard surface flooring (I have found it gives me a change of pace and helps me land big jobs where multiple surfaces are being done). I gross 125-150K a year running one full time helper and the occasional third man here and there to help out on bigger jobs. My total overhead runs about 35% on average so that puts right around six figures in my pocket when its all said and done. It was not like that the first 5 years or so though. You have to make a name for your self and learn how to hustle....work does not just fall in your lap a lot of the time. How you treat your customers and the quality of work you do will have more to do with your success than anything else.
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Unread 07-23-2007, 03:34 PM   #9
opiethetileman
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I hear ya on flipping homes. i am one of them there egg heads too. I have 2 emptys sitting still full of material. been stuck in a remodel for 5 months. but you are rite people dont relize what it takes to flip that house. not to mention how bad IRS chops ur leg off for not holding it for a year. sometimes I ask is it worth it. Heel burger king man prob makes more than me at times. Alot of unknowns when tearing apart a house. I have 3 or 4 guys I do work for as well that just buy them and call and get me a key and a check book.
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Unread 07-23-2007, 07:16 PM   #10
K_Tile
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If you flip houses as a corporation do you still have to pay capital gains? Or would it just be like any other P and L?

Based on your example $8000 over six months you can make more than that doing tile. You can also make more than that selling girl scout cookies

Everyone says that if you love doing tile the money will come. Nah! If you love money, the money will come.

I agree with Tom. I have found commercial work to be my big money maker. High-end work is great for a portfolio but I'm not in the type of work anymore. I want it BIG, Fast and Steady We are set up for that type of work. Doing the high-end work is cool but it takes really skilled people to do it. Those that are skilled at it are already doing it for themselves. They don't want to work for anyone else.

Pay? I have guys that work for me that make $12.00/hr up to $25/hr. As an owner of a company you shouldn't be making anything less than $50/hr.
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Unread 07-23-2007, 08:13 PM   #11
jmmcgorman
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Yes even through the S Corp you still have to pay capital gains tax, short term if you have it less than a year. The purpose for the S Corp is to alleviate the SE Tax. Which helps out substantially. Now keep in mind I am not only making 8000 in six months, because we do more than 2 a year. However that amount of money is not ever guaranteed. Everything depends on the market, right now the market is really down. So that amount can dwindle down and down.

My first name is Jonathan for RedRockTile.
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Unread 07-23-2007, 08:24 PM   #12
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Welcome, Jonathan.

Please go to the UserCP above, find Edit Signature, and enter your first name in there so it will appear in each post and we'll all know what to call you. We're a pretty friendly group hereabouts.
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Unread 07-23-2007, 10:38 PM   #13
K_Tile
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Quote:
The purpose for the S Corp is to alleviate the SE Tax. Which helps out substantially.
Everyone on this board that is a Owner/Operator, Self Proprietor, or even LLC should think about a Corp filing. Not only do you get rid of the SE tax (15.3%) you get the benefit of having a W2. If you have ever tried to get a loan you know what a battle it is to show proof of income as a Proprietor. To the bank you are an employee of XYZ Company based on your W2 and paycheck. Then they will loan you up to five times your yearly salary
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Unread 07-24-2007, 09:21 PM   #14
Tom Tee
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This information is wayyyyy old. However years ago when I got an sol prop. sub chapter "S" inc. I found out that incorporating in Delaware was the way to go. You do not have to Inc. in your state of residency.

Pa is NOT a favorable Inc. tax state.

If you notice that many ships on the great lakes are reg. in De. Am told because of the favorable tax status. Maybe someone else can comment on current tax status as to state of inc.

There is one other corp favorable state but I forget which one.

Many lawyers in Wilmington De only do out of state corps. They each manage several thousand accounts I am told.

tt
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Unread 07-25-2007, 11:27 AM   #15
Scooter
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I got into flipping 5 years ago and just sold my last property this year. Quite frankly, I made a bundle--But this was a super hot real estate market and while slower now, the inventory is still down and prices holding.

The business is supply and demand, and if there is a lot of inventory out there within a mile or two of the prospective property, then pass on it. I found that forging a good relationship with a real estate broker, I could make wise decisions as to which properties to flip.

I also found that vacant lots (infill) worked best for me, because new construction is more predictable than rehab work. I also moved two homes onto vacant lots and made a bundle on those two deals.

I may have to go back to work later this year, but for now, I'm just kicking back.

Remodling works for me--I bid on the job, often don't have to do much of it other than supervising subs, and interfacing with the customer, and if I've bid it out right and you have good subs, you can scratch out a decent living.

I'd pick a nitch--historical stuff, modern looking stuff, stone, slate, something to differentiate yourself from the crowd and give you expertese in the speciality. I also pass on about 40% of the business that is offered.

I won't work for customers I don't like, who are more interested in saving a buck than a quality job, and don't understand quality. I won't engage in a bidding war to get a job.

The other thing that has saved my butt is explaining verbally and in the contract that once I demo and find something squirrely, its change order time. I won't take the risk of whats behind the walls--thats the customer's reponsibility. I assume all studs 16 on center and straight as an arrow--if its not, then change order. This happens just about every job, so thats a nice bonus, and the customer is prepared for it, so its no big deal.

Finally I offer warranties, which is pure cash. Usually the job I do is a 20 year bullet proof job, so the idea that I warrant it for a year and then offer 5 or 10 year warranties for extra dough is a nice bonus as well. I never have to go back.
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