ways to reduce taxes for a first time flipper
Hi- Any and all advice appreciated. I have never flipped a house before but I am close to buying a property that I probably will end up flipping. I live in Maryland. I am guessing I will close in about 4 weeks and then fix up the property for about 3-4 months and then re-sell. Assuming I get $100k in profit, do you have suggestions on reducing my profits. Someone told me if I re-invest my profits into another home with a higher value, I don’t have to pay taxes but this is only a one time thing? Is it true that I must apply for an investment property loan that requires a 20% down payment? I was hoping to get a loan that only required 10% down as I probably will put $50k-$75K to fix up this house.
Are there any books or good websites you can recommend? Thank you. jim
Hi Jim: Thanks for your questions. I think what you’re referring to is a 1031 exchange where you defer capital gains taxes by selling one property and purchasing another one that is similar. It’s a good idea to consult with a real estate tax expert or CPA for the specifics on this. Here’s an article on 1031 exchanges. https://fitsmallbusiness.com/1031-exchange-like-kind/
In regards to investment property loans, different lenders require different down payments depending on the type of loan, short term, interest only etc, and other factors like your credit score, the property you’re buying and your flipping experience. Here’s a hard money lender with lenders listed in every state.
Hope this helps!
Best of luck,