A House Flipping Business Can Be Great - Just Do Your Homework First
If you're interested in starting your own house flipping business, take a few things into consideration first. Most importantly, if you haven't yet participated in any property renovations for profit, I recommend you get at least a couple under your belt before you decide that you want to earn your livelihood as a professional house flipper.
Sure, it looks like fun on TV. And we know that you wouldn't make the same mistakes some of those flippers make. Why, it looks like some of them are actually trying to lose money sometimes! And then in the end, they usually come out of it with a profit, sometimes more than you or I make in a year. All we have to do is avoid those stupid mistakes and we're guaranteed to make money, right?
I wish it were that easy. But you have to remember that the TV shows have a lot of footage that we never see. There are probably a lot of things that occured during the flip that had a major impact on the finished property, yet the producers of the show thought it didn't make good television because it lacked human interest. And every flip is different. Don't think that because you've been watching three different shows for two years you know everything there is to know about house flipping. Best to hold off on any career decisions until you've actually been through a couple (or more) of these renovations, and personally experienced at least a sampling of the things that can happen.
Additionally, realize that once you make house flipping your occupation, you will have to pay regular taxes for whatever bracket your income puts you in, plus the self employment tax, which comes in at fifteen percent. So it may or may not be more economically feasible to keep your present job and work on house flips on nights and weekends. Your decision may depend on whether you want to maximize final profits after taxes or your lifestyle. If you flip part-time, any renovation and sale that takes less than twelve months is considered a short term capital gain and the tax is figured at thirty-five percent. A flip that takes over twelve months is counted as a long term capital gain and taxe will cost you fifteen percent. Probably the best deal financially is to live in the house for two years while renovating it. Then you can take what's called the principal residence tax exclusion and write off either $250,000 or $500,000 of the profits, depending on your filing status. That definitely limits the number of flips you can do, but there's nothing to stop you from living in one flip and working on it during the downtime between other projects. So you can see that there are a number of things to consider before deciding to start a house flipping business. If you avoid doing anything rash when it comes to changing careers, you'll probably be happy with your final decision.
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