Here's the Question I found a house priced @$369,000 and I got it down to $345,000. 10% down,With closing cost I'm looking at $365,000 with a mort payment of $3000.00 w taxes.The house needs about $50k of upgrades...and that's being light with the price. With all said and done,I'm at $415,000.THe MOST I could ask for the house is $479,000 and settle for 465,000. That's $50k.Minus 6% realtor fee (non neogtoable%) leave me with $22100. To avoidap gains tax of 33% I would have to have the property for more than 1 year...that's $36k a year in mortgage & tax payments....so my question is where and how does one make any if any profit?
2007-03-20 10:37:41 · 8 answers · asked by robbievic 2 in Business & Finance ➔ Renting & Real Estate
The key to making a profit is to buy the least expensive house in a highly desirable neighborhood and make improvements. You want to buy a house that is currently undervalued. Look for houses that need primarily cosmetic improvements. Do as much of the work as you can on your own, to minimize the cost of hiring contractors.
The value of your house will increase due to 3 factors:
1. The value you add due to improvements (Keep in mind that the value added will typically be less than the cost of the improvements.)
2. The relatively higher values of other homes in the neighborhood.
3. Rising real estate prices over time.
Also, to be eligible the the capital gains tax exemption, you must own and live in the home for two years. If you do that, you will pay NO capital gains tax if your profit is less than $250,000 ($500,000 for a married couple.)
Note that what I'm describing is a sound investment practice. It is not house flipping in the sense that the get-rich-quick, slap-on-a-paint-job schemers usually mean.
2007-03-20 10:52:13 · answer #1 · answered by greymatter 6 · 0⤊ 0⤋
First off, you're getting ripped off on closing costs. 20K is really high.
Second, you'll have other closing costs (excise tax is one) on top of the 6% realtor fee.
Third, you dont EVER carry a flip for a year. The tax exemption only applies to homes which are the primary residence, and its two years. Business flips do not count towards this exemption.
The capital gains tax should NOT be 33% unless you're in some sort of absurdly high tax bracket. Even if it WERE 33%, 33% of 22K (you're only taxed on profits!!)is only $7,000 or so-- so why the heck would you instead piad $36,000 in mortgage payments??
2007-03-20 11:09:19 · answer #2 · answered by Anonymous · 1⤊ 0⤋
We offered our homestead in CA & moved in the time of united states as an instance in Florida. the hardest section is searching the right resources. in this gradual market, you want to purchase decrease than appraised fee. foreclosure are not as straightforward to purchase, banks want market fee or only a schmidge decrease than, and they are oftentimes complicated to arise with. Auctions are a magnificent source, yet you ought to have the money beforehand - which maximum folk do not have. once you discover that grotesque homestead in a magnificent community, then you definately ought to do each of the artwork your self. settlement exercising consultation in undemanding words at the same time as mandatory. make certain time as against fee. In our case, spending 2 more beneficial personal loan funds made more beneficial experience than figuring out to purchase exertions. Contractors will devour up your salary, and regrettably you should positioned sweat fairness on your first few flips. save your receipts for all improvements so that you'll be able to deduct them for tax applications. we are about to promote our first turn and apparently like we may make $40k Gross earnings earlier personal loan expenditures, realtor expenditures and taxes (meaning we are slightly breaking even)..... they not in any respect communicate the web earnings on those homestead flipping shows. yet hey, I made an grotesque homestead acceptable and that i stay truly employ loose for the summer season. Haha.
2016-12-02 07:35:59 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Look up a 1031 Tax Exchange..
2007-03-20 11:21:15 · answer #4 · answered by nagyinvestments 1 · 0⤊ 0⤋
There are many land experts who can assist you in your present dilemma, if you are willing to pay their fees.There is even a book under the title Land Secrets which you can get from any Book Stall
2007-03-20 10:48:08 · answer #5 · answered by cabridog 4 · 0⤊ 0⤋
Good thing your asking now and not holding the house. Pass
http://www.breakingbubble.com/
As far as fliping goes today. The best way to have one million dorrals next year is to start out today with two million and do not spend more than one million.
Flips can Flop.
2007-03-20 11:54:54 · answer #6 · answered by Anonymous · 0⤊ 1⤋
Pass on that one, the numbers are all wrong.
2007-03-20 10:58:18 · answer #7 · answered by Kevin H 4 · 1⤊ 0⤋
its a business, you have to pay the tax
2007-03-20 10:42:12 · answer #8 · answered by bayareart1 6 · 0⤊ 0⤋