The surge in foreclosures, which nationwide have reached 2.9% of total serviced mortgages, has created many opportunities for real estate investors concerned in flipping real estate to buy and flip foreclosed houses. Particularly sufficient for the current market could be the so-called "fix and flip" strategy, in which investors purchase foreclosed homes at major discounts - whether due to the house's health or due to the owner's urge to sell the house right away - and flip these homes for a maximum return within a few years. In fact, this strategy could be thought about the most sufficient for the current market. However, in increasing to flipping properties at the right price for a mountainous gain, maximizing return on venture should also include minimizing taxes on capital gains.
Some investors could also fall into a trap of buying a property and selling it too quickly. In fact, opportunities for this kind of flipping are little in today's market. However, maximizing gains on a flipped property is not only about getting the top potential price on the house, but also trying to minimize capital gains taxes for the optimal return on investment. Therefore, real estate investors who want to flip a house for the optimal return should hold a property for at least a year in order to qualify for the 15% capital gains tax rate. As property prices continue to decline in most local markets, the current market conditions in most local housing markets are unlikely to provide an occasion to flip a property within a few months and perceive a critical gain. However, fixing-up property and keeping it for at least a year until an occasion arises to flip it for an engaging behalf could prove as a smart venture choice.
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One of the tax provisions many real estate investors who flip properties have used is section 1031 of the Internal wage Code, also called "like-kind" exchange. Under this section, investors can defer payments of capital gains taxes by rolling their capital gains into a similar piece of property. They have 45 days to identify a favorable property and 180 days to close the transaction. Investors cannot take hold of the sales proceeds from the flipped property, but must place the proceeds into an escrow catalogue until they find a favorable exchange property.
An even greater benefit is ready to those real estate investors who chose to use the house bought for flipping as their former house for at least two years, within a period of up to five years. In this sense, they can avoid tax liability for capital gains of 0,000 for an personel and 0,000 for a married combine filing jointly. With fixes and remodeling on the venture property, investors could accomplish a mountainous tax-free behalf in a uncostly venture timeframe.
Savvy property investors know that flipping real estate properties involves not only the strong drive to earn a quick behalf but also a full insight of the local market conditions and tax considerations that have to be assessed in order to accomplish the optimal return on property investments. All property flippers should seek expert counsel from their accountants or tax lawyers in order to understand the ready options to maximize gains on flipped venture properties. By doing so, investors will have the right knowledge to make the right venture choices that can yield optimal returns on their investments.
Flipping Real Estate - How to Maximize profit by Minimizing Tax Burden
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