What Kind Of Taxes Are Renovaters/investors Paying??
Everyday I hear in the media of all these investors/renovators in the business of fixing up and selling homes. How much in taxes are they paying? If it is up to 50% as some would state, how do they stay in business? What tax strategies are they using to minimize their liabilities??
Most of the successful investors I know are holding property. If you sell it you have to pay capital gains but holding it just makes you rich.
Example: You buy for 10k you rehab for 10k and the property is now worth 40k you go to the bank and get a loan for 80% = 32k. You lease the property to someone for 600 per mo and they pay the loan off for you. You have 12k and they pay the loan plus put some in your bank.
Good Luck
Ken
Investors/renovators in the business of fixing up and selling homes are paying taxes at their ordinary income tax rate, plus self-employment taxes on their net income. Add in state income taxes at ordinary income tax rates as well.
A business entity may help reduce some of this tax bite.