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Flipping Houses Has Become A Fascinating—And Sometimes Very Fulfilling—Way To Make Money. By Taking An Ordinary House And Making It Extraordinary, You Can Make A Ton Of Cash From Improving It! All It Takes Is A Bit Of Hard Work, Style, And The Initial Investment—And Voila!—Success. Welcome To FlippingBasics.com, Your Free Guide To Everything You Need To Know About Flipping Houses. Here, You'll Find Free Resources, Articles, And Information On Our Helpful, Easy-To-Use Site.

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Revealed: 9 Important Tips To Successful House Flipping   Home Flipping 101: Make Maximum Money With These Methods   Flipping Houses: Common Blunders That Flippers Make   Hot: 3 Tips To Help You Find The Perfect Home To Flip  
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4 Dangers In Flipping Real Estate
If you have recently purchased some real estate for investment purposes, you are in good company. Recent reports suggest that as many as 25% of these purchases are made by those who plan on using the property for investment purposes only. If you hope to "flip" the property there are 4 things you must be aware of that can put a crimp on your profits. 1. Property Taxes. Keep the property for a few years and you may experience a surge in property taxes especially if your taxes are reevaluated during that time. Some hot real estate markets have seen taxes nearly double in just 5 or 6 years. 2. Renovation Expenses. You may have purchased a "fixer upper" at a bargain rate. Once your...
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Flipping Properties Not for the Risk Adverse in 2006
Real estate profit talk has permeated American culture the last five years. The pickings were good for those looking to flip properties and make a profit on minimal improvements and higher than normal appreciation rates. 2006 presents a sobering reality for weekend millionaires and arm chair investors. With rising new construction and resale inventories and declining numbers of buyers make flipping properties a riskier proposition than ever before. Mark Nash author of 1001 Tips for Buying and Selling a Home offers tips for those considering buying properties in 2006 to flip. The ability to add long-term value is the key to selecting the right properties at the right price in the new...
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Real Estate Investing - Makeovers vs. Flipping
Please don’t call it "flipping." Some real estate investors who practice the technique of buying property for immediate fixup and resale call it "flipping houses." I have never liked this term, for it strikes me as reference to a gimmick. It seems "flippant!" It sounds like crude tagging of a very noble undertaking. Fixing up cheap properties is raising values in America's housing! It is a profession of dignity. I think the makeover process deserves reverence for providing people with a better place to live. Without proper maintenance, all housing deteriorates. You can find cheap houses everywhere in dire need of repair because of neglect and abuse. You can buy these depreciated houses...
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Tax Tips For Real Estate Investors Using Ira Funds

Author:
Stephen Nelson

You’ve seen the advertisements and news articles. IRA funds can be used to make real estate investments. But before you jump on this bandwagon, make sure you understand some of the tax planning angles related to this opportunity.

Passive Loss Deductions

Almost always, an important component of your real estate profits comes from the tax savings associated with depreciation. These paper losses, referred to as passive losses by the Internal Revenue Code, can save both small and professional real estate investors thousands of dollars a year in income taxes. Unfortunately, passive losses from depreciation and related, similar tax deductions won’t benefit real estate investors investing through IRAs.

Capital Gains Preferences

If you sell an investment for a profit—whether a stock or real estate—you get a tax break because your profit gets taxed at a preferential capital gains tax rate. In the best case scenario under current tax law, for example, your capital gains get taxed at 15% rather than at 35%.

Unfortunately, by putting real estate inside of an IRA, you lose this benefit. In effect, the appreciation you enjoy from your real estate investment gets taxed at your marginal income tax rate rather than at the capital gains rate. (Fortunately, the tax gets paid when you withdraw the money.)

Note: This “problem” also exists for other investments that produce capital gains, such as stocks and mutual funds that invest in stocks.

Unrelated Business Income Tax

In certain special circumstances, an IRA needs to pay income taxes on the profits it generates. These taxes, called unrelated business income taxes, essentially put the IRA investor in the same position as a regular taxable investor.

For example, if you’re developing and then flipping properties inside your IRA, you may actually be an active trade or business. And in this case, your real estate investment—even though it’s inside an IRA—may be subject to income taxes. (Your IRA custodian is supposed to report your taxable income and tax liability, and then pay the taxes but many don’t…)

And here’s another example of a situation where the unrelated business income tax can trip you up. If you borrow money to invest in real estate—the typical situation in any leveraged real estate investment—the profit you earn on the money you’ve borrowed is treated as unrelated business income. Accordingly, that profit is subject to unrelated business income tax.

Unrelated business income inside an IRA is taxed according to trust taxation rules, which means that as soon as you’ve made much money at all, you’re taxed at the highest marginal tax rates. Ouch.

Closing Caveats

Real estate is a great investment. And real estate belongs in any investor’s portfolio. But you need to think carefully about buying into the idea of using your IRA to make real estate investments. If you do decide to invest in real estate through your IRA, first consult with your tax advisor.

About the Author :

Delaware LLC formation author & CPA Stephen L. Nelson has written more than 150 books. Formerly an adjunct tax professor at Golden Gate University—the nation’s largest graduate tax school—Nelson is also the author of QuickBooks for Dummies. Copyright © by 2006 by Stephen L. Nelson, CPA. Contact him at http://www.llcsexplained.com/doityourself_Delaware.htm.


This article is distributed by: www.iSnare.com

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If you like the article above, you may be interested in the following article which is also related to Flipping Houses...

5 Rock-Solid Real Estate Investment Strategies
Investing in real estate is more complex than simply buying and selling homes. To help new real estate investors to decide which strategy might work for them I put together 5 rock-solid strategies. It is up to you which strategy you feel more comfortable with. 1. Buy and Hold This real estate investment strategy is commonly known as rental properties. Becoming a landlord is easier than you think. You buy a property, you advertise it as “for rent” and you sign a contract with your new tenant. That’s where the love story ends. You need to know a lot about your duties and your rights as a landlord or you will find yourself in trouble. Screening your prospect tenants is your first line of defense. Protecting your property from damage is your first duty. I might paint a little bit dark picture of being a landlord. But dealing with tenants can be the most frustrating job you ever had. Do yourself a favor and visit a bookstore or library and get as many books on landlording as you can get. Armed with this knowledge you will be able to create a positive cash flow and a long term relationship with your tenants every time you put the “For Rent” sign in the yard. With the buy and hold strategy you basically have 3 income streams going at once. Amortization; while paying your mortgage you also lower the amount you owe. Appreciation; while owning the property it increases in value. Tax incentive; as a landlord you will be able to deduct your investment cost over several years. (See you tax advisor for professional advice). Based on this information you can easily see that even if the rent doesn’t cover 100 % of your mortgage payment you will still be able to create a positive cash flow. 2. Flipping This is the art of “buying” and “selling” real estate investment without...
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