Real cost of flipping in the US
Many people have invested to flip properties, but this may not be as profitable as most believe when taxes are figured in. Moreover, how does it affect the community in terms of value
In many areas of the US, house flipping, or the purchasing of property to fix and then resell at a higher value, has been a popular investment opportunity. Thousands of investors have used this method to make a profit.
In a closer look, many of these investors do not realize the tax consequences of investing real estate. Some mistakenly believe that they do not have to pay taxes on the property due to an old tax rule. But, that rule has been replaced with a new one that does not provide the same benefits. The rule now states that you can only get the lucrative tax break if the property is your primary residence.
Many first time investors do not realize the cost of this tax and therefore get a rather shocking bill from the IRS down the road. This can often cut into profit considerably.
In terms of the effect a foreclosed home has on it's city is considerable. In Indianapolis, community leaders are working with the Housing Agency to fix and sell foreclosed properties within the city. There are so many that it is affecting the overall value of other properties in the area. It is believed that these homes are costing each neighbourhood about a one per cent drop in value on non foreclosed properties.
Here, there are a large number of homes in specific areas of the city causing crime rates to rise there as well as a degrading of the community. By fixing and reselling the properties, the city hopes to improve the image and the values of properties here.