House flipping could be a challenging task, especially when you will be faced with the burden of taxes eating out your profits. Here are some tips for you to know how to house flip without having to pay the necessary taxes and where to affiliate yourself to earn a competitive advantage over other brokers in the market.
According to Charlotte Observer, flipping homes is a fun way to earn yourself some profit in the real estate market in a flash. The best way to do this is to search for a bargain house, especially those that are candidates for a foreclosure, add in several updates to the flooring, the walls, the painting, the furniture and other parts of the house, and get it back in the market in a month or so.
Although this would seem like a good way to earn profit selling houses, house flipping this way could play to your disadvantage. Not only will it yield a shortage in inventories and appreciation of value, it will also burden the seller with a decrease in profits due to tax payments. So then, how do you house flip the right way to make the most out of the property you sell?
According to The Globe and Mail, selling a principal residence will make a home seller eligible for tax exemptions as provided for in the "Principal Residence Exemption" or PRE. However, selling a house as a "principal residence" might be tricky to pass as one, especially when you're selling a property you did not reside in.
As mentioned above, fixing up a property and selling it as fast as you can could play to your disadvantage. The best way to sell a home without having to suffer tax burdens is to live in it for a bit after making the necessary upgrades before selling it in the market. However, if you feel that you do not wish to reside on the said property, the courts will tax your profits from the sale as a capital gain.
With these information, you now know that if your plan is to purchase a property and flip it for profit, make sure that you take cognizance of the court's criteria in imposing taxes over the property when it sells. This way, you may determine how to sell the house to credit yourself under the "Principal Residence Exemption" law and free yourself of taxes that would eat up some of your profits.
