The Success of Flipping Real Estate

The definition of real estate property flipping is when a real estate investor buys homes and then turns around to sell them hoping to make a profit. To see a positive gain, the time between purchasing the property and selling it can range from months up to a year. Being your own boss and having the freedom to invest in real estate with the hope of earning more than a 9 to 5 job is very enticing. Here are two types of real estate flipping options:

  1. An investor buys a property and fixes it up to make money from selling the home at a higher price than what they paid for it.
  2. An investor buys a piece of property as is at a time when there is a rapid rise in home values. They hold onto the real estate for a few months and then resell it at a higher price to make an increased profit margin.

Property flipping sounds like a great way to increase your income, but is it for you?  Of course, the right strategy plays a key role in the success of flipping. There is financial planning involving a capital gains tax, the right type of return you can expect, and choosing the right real estate.

Even though you are considering flipping a home, you should still conduct an inspection. Use an experienced contractor who can not only point out the obvious but who can also inform you of any hidden surprises once you begin a repair job. Whether you have real estate experience or you are an individual who flips properties for profit, please perform your due diligence.

In other words, before you purchase a flip property, ensure that the title is clear and free from liens. Work with a knowledgeable business planning and consulting firm with high-quality services for real estate investors and business owner resources.

To be a successful flipper, let’s follow the money. When you buy a real estate to flip and fix it up, the profit you receive is taxed under the capital gains rules. To be excluded from paying a capital gains tax, you can fix up your property and live in it for over two years because you are considered a homeowner.

As a flipped property, the IRS treats your real estate purchase as an inventory purchase and not a capital asset. Therefore, the IRS categorizes your flipped property profits as plain income that is subject to a self-employment tax. To enter the real estate game of property flipping, you must be aware of your upfront capitalized costs because it is a pricey expense before you make a good profit.

Your capital costs generally include the following:

*price of your real estate property

*upfront and indirect material and labor costs

*utility costs

*rent

*insurance

*production period interest for capitalizing costs in preparing a property for development and sale

Real estate taxes

If your flipped property is a rental, first you fix it up and then you hold it for a year which very likely will help negate your paying long-term capital gains taxes. Also, if you flip a home within one year, your gain is treated as a short-term capital gain which is taxed at your area’s lowest tax rate.

There are many reasons why people invest in flipping real estate properties. The TV flipping stars enjoy working with their creative hands, plus they have the money and time. If you want to make your flipping improvements a DIY project, you will save money of course, rather than hiring several home improvement contractors.

At the end of the day, whatever your reasons are for flipping real estate, know the rules of the game so that you don’t get stuck with lemons you can’t turn around and sell, thus spending more than your gain would have been.

Your key factors in flipping involve knowing your tax liabilities and purchasing costs, which means choosing the right properties, refurbishing costs, holding costs you can afford, and consult with experienced real estate flippers and business real estate consultants to save yourself an expensive headache.

Key Considerations Should You Wish to Buy a Home

Buying a home is something which many people look forward to for a very long time, the journey can be difficult and getting caught out in the rent trap is something that happens to many. With this being said, if you are smart with your savings and stay focussed on what it is that you are after, you can get yourself on the property ladder in no time at all.

I didn’t buy my first home until I was 26 years old and it was difficult for many years to get myself into a position to be able to afford it. I made some mistakes along the way to buying my first home and so I wanted to write a little about some key considerations which you are going to have to make once you have decided that buying a home is something that you want to do.

Budget

Most people are going to rely on a mortgage to buy their first home and it is best that you lay down as much as you can on the mortgage by way of deposit. In order to ascertain how much you are able to invest in your property, you need to make sure that you are smart with your budgeting.

It is important to remember just how many costs are involved in buying a home, aside from the value of the property itself. You will need to pay for searches before buying, you will need money for solicitors and the necessary conveyancing which allows you to complete the purchase as well as having money put aside for furniture and decorations within the home. It is also important  that you make a smart decision regarding how much you borrow as your monthly costs will increase once you are in the home, taking all of this into consideration is essential if you are planning on buying a house.

The Property

It can be easy to be blinded by beauty when you are searching for a property but you should sit down and make a list of exactly what it is that you are looking for in a property. Large properties require more maintenance and more furniture and they could also present more problems. Make sure that you understand that getting that dream house will not happen first time and your first house should be one which serves your needs and acts as a stepping stone to the next house, it is called the property ladder for a reason and this initial house is just the first rung of the ladder.

Market

It is important that you are buying a property at the right time and in the right place and you should make efforts to ensure that you understand where the property market is at the time of buying. If you are buying at the high end of the market then you could face negative equity issues further on down the line, unless you are in a rush you should be smart and be patient.