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.
Making The Decision To Sell Investment Property
A lucky investment property owner has the opportunity to flip a property and make a profit. If the owner wants to keep investing in real estate, a 1031 exchange might be a solution to defer taxes. Making the investment property your primary residence for two years before selling will also allow you to keep the profits tax free.
Capital Gains And Investment Property Sale
An investment property owner wants to know about their tax obligation when selling the property. To read more about what tax is owed when you sell investment property, go to the IRS's website (irs.gov) and download Publication 550 "Investment Income and Expenses" and Publication 527 "Residential Rental Property."
Selling Property For $1 Results In Huge Capital Gains
A mother sells her home to her children for $1. Now they face a massive capital gains tax bill. Gifting the home or leaving it in her estate may have been a better plan to avoid huge capital gains taxes.
Using IRA Funds To Purchase Real Estate
Although IRA rules specifically prohibit using IRA funds to purchase a property for personal use, the rules don't seem to say anything about using IRA funds to purchase a property for investment. At least, this is the loophole that many IRA holders are using to purchase investment property. Many companies specialize in helping people use their IRA to purchase investment property.
Use Investment Property Cash Flow To Pay Off Primary Mortgage
When you buy investment property you want to take in more money than you spend on the mortgage. When you have positive cash flow on an investment property you can take that extra cash and use it to pay off the mortgage on your primary residence. Once you've paid off the mortgage on your primary residence you can save money to use toward maintaining the other properties and eventually buy another investment property.
Investing In Stock Versus Investing In Real Estate
Does investing in real estate make more sense than investing in the stock market? It may be wise to sell off stocks to get the cash for a down payment, or your money might be better left invested in the market.
Use 1031 Exchange To Defer Capital Gains Tax
When you sell your current investment property and purchase another property that costs at least as much, you can defer all capital gains tax if you use a 1031 exchange. A 1031 exchange offers tax-free real estate transactions, but there are some important rules to keep in mind.
Rollover Capital Gains Question
A 1031 exchange, or a Starker Trust, may apply in certain situations with investment properties. In this situation, a reader has two homes and vacant land that they want to transfer to a builder in exchange for doing work on on one of their homes. Unfortunately, a 1031 exchange will probably not work in this circumstance because they already own the property. However, they should talk to a tax professional for more options.
Home Office Deduction And Capital Gains
The home office deduction may be available to you if you are running a business out of your home. But what happens when you stop using your home office? How does it affect your capital gains when you sell your home?
Becoming A Real Estate Investor
There are a few basic steps involved with real estate investment you only need to know basic math. Avoid paying middle-of-the-night infomercials that promise to make you a real estate investor and use that money towards a down payment. Buying your first real estate investment property is the hardest.