who is responsible in paying property taxes on a house that you flip and maybe sell within 4 or 5 months?Husband and I are thinking about trying it but are trying to find out as much info and advice as possible.I know we can get a rehab loan at the bank for 8 1/2 % on interest only for a 6 month note.Does that sound fair?Any additional knowledge anyone has would be great we are trying to read up on it as much as possible.
2006-09-29 16:06:32 · 6 answers · asked by tsnakeus 2 in Business & Finance ➔ Renting & Real Estate
Taxes are pro-rated at closing for the duration of time you own the house. They are pro-rated based on an estimate of how much the taxes will be. You will see the amounts on your closing statement. The amount of estimated taxes will come out of your sales proceeds so you don't actually write a check for them.
81/2 is very high for a real estate loan. You also should not lock yourself in to 6 month just in case it takes longer to sell that you forecast. Good luck.
l
2006-09-29 16:19:29 · answer #1 · answered by lcmcpa 7 · 0⤊ 0⤋
The taxes are paid by the owner, and are prorated at settlement. If you own it for 5 months, you'll pay 5 months of taxes.
Regarding the rehab loan, a rate of 8.5% is actually reasonable since those types of loans are very risky for the lender. Be careful though, because it will probably balloon at the 6 months. Meaning, you will have to pay it IN FULL on that 6 month deadline. Also, you'll probably need detailed plans from a contractor explaining the work and cost of any repairs that will be done. You may want a contractor to look at a house you plan to buy PRIOR to submitting an offer.
I would recommend a short-term ARM (adjustable rate mortgage), and even Interest-Only, to minimize your cost to keep the property. Is the property is such despair that you can not qualify for a typical refinance loan for cash out to do the repairs? Consider that option if the house is relatively in "move-in" condition. Hope this helps.
2006-09-29 17:42:08 · answer #2 · answered by abcdgoodall 4 · 0⤊ 0⤋
Taxes are paid by who they're owed by - so if you own the house for 5 months, you'll pay 5 months taxes.
Some taxes are paid in advance and some in arrears - that means that you may pay the tax in December 06, and it covers Jan 06 - Dec 06 (it means that you paid those taxes in arrears) in that case, when you bought the house the people who sold it to you have to pay you NOW the taxes from Jan 06 - Sep 06 (they owed it even though they didn't pay for it yet), so that you'll have that part of the money when the bill comes due.
If the taxes are in advance, it means you pay in Dec 06 for Jan 07 - Dec 07. In that case, when you bought you had to give them a refund of the taxes that they already paid but didn't get beneif for (when they paid taxes in Dec 06).
2006-09-29 16:10:57 · answer #3 · answered by Anonymous · 1⤊ 0⤋
That sounds about right on a typical bank note for a property purchase. Assuming the taxes you're talking about are ad valorem taxes then it would be prorated at closing meaning you settle up your taxes then for how many days in the year you owned the property.
2006-09-29 17:50:38 · answer #4 · answered by lefty 2 · 0⤊ 0⤋
Property taxes are paid by whatever the purchase contract says. However, I think you're concerned about capital gains tax. Use a real estate IRA to purchase the house and whatever profits you make, put it back into the IRA and you won't have to pay capital gains taxes.
Regards
2006-09-29 19:38:33 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Ask the municipal authorities or resources tax authority in jurisdiction in which resources is placed no matter if & how the resources taxes might want to be prorated for era of possession.
2016-12-04 01:22:38 · answer #6 · answered by ? 4 · 0⤊ 0⤋