Fixing a home and selling it at a higher price can be lucrative, but make no mistake: it’s a tough job that requires a lot of work.
A fix-and-flip is a learning experience that takes energy and money, too. Not only that, there are rules to follow to make sure your investment is solid and legal. Make sure you check into both federal and state rules before gathering your renovation team.
Flipping Homes in Tampa
We’ve all seen the shows, right? A young, beautiful couple gets a great deal on a money pit and decides to fix it up; they’re going to sell it for a huge profit. Luckily, the husband is a carpenter, the wife is an interior designer and the father-in-law owns a hardware store.
We watch them transform an ugly duckling home into a great new starter home for a family — and it’s virtually maintenance free.
What we don’t usually see are the weeks of blood, sweat and tears (or legalities) behind this transaction.
Obtaining a Mortgage
Mortgages issued by the Federal Housing Administration mandate that the property be owned by the seller for at least 90 days before resale. There are also rules on how many appraisals you need to have on the home to determine its current market value. You may also need to know about HUD eligibility requirements.
Many people who invest in fix-and-flip homes secure other types of financing, such as hard money loans, because banks aren’t usually willing to lend enough money to purchase and rehab a house.
Taxes
Who else is going to cash in on your investment? The IRS.
Are you subject to long-term or short-term capital gains? That depends on how long you hold on to your property.
Can you be considered a dealer in real estate or an investor? That depends on how many properties you sell in a year and how much of a profit you make.
If it sounds confusing, it can be. (That’s another reason it’s important to build a solid team of professionals to work with — you’ll need all kinds of help and advice, particularly if you’re buying your first investment property in Tampa Bay.)
Searching for Investment Property in Tampa?
When you’re ready to find an investment property in the Tampa Bay area, whether you’re looking in Hillsborough County, Pasco County or Pinellas County, call us at 813-961-6000 or 727-584-8480. You can also contact us online; we can begin searching for your investment properties right away.