Flipping houses has become a popular way of making money in real estate. The chances to buy a home at a lower price, then fix it up and sell at a higher one may sound exciting, but are you aware of the tax implications? Dean Graziosi has provided some useful information about this below.
Flipping is a viable source of income as long as you live or buy in a region where prices haven’t significantly decreased. It’s important to understand both the advantages and pitfalls before entering into such a venture.
If you plan to flip houses, you will need to consider two factors. One is the amount of money you have to put into actually buying the house. The other is how much you have to then turn around and fix it up. If you are able to do the work yourself, this cost will be significantly less, but if you aren’t able to or if you simply don’t have the time, you’ll need to factor in the cost of hiring someone else to do it instead.
Taxes for properties you flip can get a bit confusing. Many people operate under the idea that it is possible to get a tax break when selling a property. This is true if the property is your own personal residence and you’ve lived there for quite some time, but this is not the case for properties you plan to buy and flip. Since the residence you are purchasing to flip is an investment as opposed to an actual dwelling in which you will live, the tax considerations will be much more costly and differ significantly.
As an article posted on bankrate.com points out, high expectations bring higher taxes. Sure you can buy and flip for a profit, but once the taxes are figured into it all, that profit you make can actually be reduced. A slower investment pace on the other hand, could net you a better tax situation.
Before beginning your new real estate career flipping properties, learn about all the tax implications. Knowing how to flip is crucial to coming out ahead in the end. Sure you might make a profit off the top, but you might just wind up paying a lot of taxes which will net you significantly less money in the end. What looks like more money can really wind up being less at the end of the year when it comes time to file your income taxes. You want to grow your business slowly, and your profit is no different. It will increase over time if you slow down your buying and flipping process just a little, and you’ll wind up seeing a true profit at the end of the year. Visit Dean Graziosi’s website for more real estate topics and information.