When you invest in real estate, you have to have a long term vision and patience. Unlike buying stock which can be readily purchased and sold, investing in real estate does not afford a quick sale. While it is true that in years past, people were able to flip properties and make fast money in real estate, for most real estate investors the idea is to buy and hold real estate. Some investors in real estate will benefit from federal income tax breaks and other investors in real estate can hold a piece of property and later sell it and buy other property while deferring the payment of any federal income taxes until the real estate is cashed out. Real estate is not a liquid investment and you may need to consider a long term strategy or option even if you are considering a shorter term investment in real estate. Read our articles on investing in real estate and learn about problem tenants and how to handle them. Learn about finding the right team to help you navigate the world of real estate investing. And, finally, learn about how to structure your investments, insure your real estate investments and minimize your federal income taxes.
Capital Gains Tax Angle On Selling Second Home
How long you've owned property before you sell is a question that the IRS wants to know. It's primarily a tax question because how long you own your home relates specifically to how much tax you'll pay, if any, on the profits you earn when you sell. According to the IRS, if you own a home for less than a year and then you sell it, the profits are considered to be ordinary income. If you own the property for at least 12 months, you would pay capital gains tax at rates of up to 15 percent, plus state tax.
Capital Gains Taxes: Primary Residence vs. Investment Property
Are primary residences and investment properties subject to capital gains taxes? How can you defer capital gains tax penalties? IRS rules differ for primary residences and investment properties, but the only way to defer tax on an investment property is to do a 1031 exchange and purchase a replacement property that costs as much or more as the property you’re selling.
Rental Property: A Financially Successful Investment
Owning rental property can be a financially successful investment. Ilyce advises a reader who recently bought her first rental property on how to make her investment a financial success. One of the most important ways to make owning a rental property a financially successful investment is by renting to quality tenants.
Book Review: The Wall Street Journal Complete Real-Estate Investing Guidebook
Here's one important rule to know about investing in real estate -- you don't make any money until you sell or lease your property. Choosing the right amount of rent or the right list price can make all the difference. These are some of the lessons learned and shared in a brand new book called The Wall Street Journal Complete Real Estate Investing Guidebook.
Protect Your Real Estate Investment From Adverse Possession
What should you do when a neighbor encroaches on your land, especially if it is an investment property? Learn from a trial lawyer what he advises for cases of adverse possession. Understanding how to handle adverse possession will help you protect your real estate investment.
How To Find A Tenant
A buyer has made her first purchase of investment property and is wondering how to go about renting it. The most important thing you can do to make investment property successful is to find good quality tenants. You'll also want to follow any local rules or regulations with your investment property.
Buying A Second Home With 1031 Exchange
A 1031 exchange cannot be used to purchase a personal residence. A 1031 exchange is used when selling investment property by replacing with another investment property that costs at least as much as the sold property. A 1031 exchange could be used to purchase an investment home that is rented out for a few years before converting it to a personal residence.
1031 Exchange: Defer Capital Gains Tax On Investment Property
The only way to defer paying capital gains taxes is to use the 1031 exchange and purchase new investment property using the proceeds of the sale of the old property. You cannot avoid paying taxes on your profits, unless you are using a 1031 tax free exchange. A tax-free exchange would allow you to swap two investment properties for another (or several others) that costs at least as much as the sales price of the two together.
Understanding A 1031 Exchange
A 1031 tax free exchange requires that you purchase a replacement home for at least the price of the one you sold. A 1031 exchange is a provision in the tax code that allows you to defer the payment of taxes on the sale of an investment property, but you have to set up the exchange prior to the sale of your home.
How To Find A Real Estate Advisor
A buyer reader is purchasing investment property and looking for a professional to help. If you want help with your investment property purchase, start by contacting someone local who really knows the specifics of real estate law. Referrals are also a great way to find a professional that will help you with your investment property purchase.