With all the talk of border security these days, there’s been a lot of talk about hiring undocumented workers. I’m not going to get into the moral considerations or whether or not undocumented workers “take jobs away” from legal residents—citizens or not. I’m not going into all that because by “undocumented” I mean anyone who can’t or won’t complete a W9, the form by which you would file a 1099 at the end of the year. Instead, I’m referring to what we used to call the “underground economy”—cash workers. What I will do is give you a simple formula to make your own decision.
Here’s part of a post I wrote for our HermitsBuyHouses blog. It’s been popular over there, so I thought I would share it here and then go into more detail:
Here in Texas, and maybe where you are, too, we just got our yearly property tax bills. We’re used to them going up. In fact, the appraised value of the house we just moved out of, in Williamson County, Texas, went up by $30K! That’s quite an increase, you may be thinking.
But wait, there’s more! We bought a house last year in Milam County, Texas. It’s true; we did make improvements to the house. We painted the exterior, put down new laminate flooring, fixed some broken windows, and trimmed a tree. Sure, that probably increased the value of the house. However, it went from a $39K appraisal to $190K! I guarantee you no one in this town would pay that much for a house with ancient kitchen and bathroom on the main drag, no matter how nice the paint is! Yes, we are going to protest that! Of course, we want to pay for schools and such, so we are happy to pay, just not more than the house is worth.
What if we were on a fixed income and our house’s taxable value went up like that? As I mentioned before, it has been known to happen. If you live around Austin, it may even be happening to you or a loved one.
Who Do You Work For?
The answer may surprise you, especially if you are self-employed.
I’ve recently posted a series of blog and Facebook posts describing how it is getting harder to make money renovating and reselling houses. I’m not complaining. You just have to be aware of the market conditions to survive in this business.
“Flipping” is generally construed to mean completing the buy-renovate-sell process in less than a year. Some say in less than 9 months. Today, I want to explain why “flipping” houses is less profitable than renovating and holding them. And that explanation derives in part from who I want to work for.
I’m going to take one of the projects we did last year and show you how we could have dramatically increased the amount of money it put in our pockets. Since it’s impossible to handle the same deal two different ways, the numbers I’m presenting are projections based on the reality of the deal.