flippers

[TrustUser]

hi everyone,
2-3 years ago i started a thread about how to treat flippers. such as long-term versus short-term. and more importantly, whether the irs would classify it as a business or just investment income. i could not find that thread, so i thought i would touch bases with you.
well i tried it with 3 properties. WAY TOO MUCH INVOLVEMENT.
so as soon as i get rid of this 3rd property, that is it for me.
unless you are a professional and have workers at your beck and call, it is a poor way of making money. and to be honest, i would still probably make more money investing in trust deeds, while sitting in my easy chair.
so even though i will have to may more taxes on all short-term income, i have little to no involvement most of the time

 

[quincy]

hi everyone,
2-3 years ago i started a thread about how to treat flippers. such as long-term versus short-term. and more importantly, whether the irs would classify it as a business or just investment income. i could not find that thread, so i thought i would touch bases with you.
well i tried it with 3 properties. WAY TOO MUCH INVOLVEMENT.
so as soon as i get rid of this 3rd property, that is it for me.
unless you are a professional and have workers at your beck and call, it is a poor way of making money. and to be honest, i would still probably make more money investing in trust deeds, while sitting in my easy chair.
so even though i will have to may more taxes on all short-term income, i have little to no involvement most of the time

Did you have a question, TrustUser?

How the IRS treats house-flipping depends on several factors, including whether the flipping of houses is the main source of income for an individual or not and how long the house is held and if it is owner-occupied or not.

It is always smart to consult with a tax professional.

 

[quincy]

Here is a link to (what I think is) the older thread you started on house-flipping:

https://forum.freeadvice.com/threads/long-term-and-short-term-gains-and-losses.658562/

 

[TrustUser]

hi quincy,

thanks for the input. my model had included keeping them over a year, so they could be long-term. i was never gonna live in any of them. but had it worked out, i guess i would have had most of my income from them. i dont have any normal work income. whatever i make is mostly from investments.

but it just turned out to be terribly non-profitable. while it turned out to be a big mistake, i am still glad i tried. otherwise, i might have always wondered - LOL.

the main reason i am reporting back is simply to let others know that it is not a good thing to get into, UNLESS you have workers you can depend on.

 

[TrustUser]

yes, that is the thread i was looking for !!!

 

[quincy]

hi quincy,

thanks for the input. my model had included keeping them over a year, so they could be long-term. i was never gonna live in any of them. but had it worked out, i guess i would have had most of my income from them. i dont have any normal work income. whatever i make is mostly from investments.

but it just turned out to be terribly non-profitable. while it turned out to be a big mistake, i am still glad i tried. otherwise, i might have always wondered - LOL.

the main reason i am reporting back is simply to let others know that it is not a good thing to get into, UNLESS you have workers you can depend on.

Learning something about what you are doing before doing it is certainly helpful, although experience can also be a good teacher. I guess it comes down to how much you are willing to pay in the end for your lessons.

I have invested in several properties over the years but for use as rentals rather than with flipping as a goal. Both types of investments, however, require a lot of time, energy and money and both come with financial risks.

 

[TrustUser]

i have also divested myself of much of my california real estate. until and unless the state turns red, i want to own as little real estate as possible.

i am content to invest in very safe trust deeds. i dont want to spend a big portion of my time on money issues. i cant take it with me

 

[quincy]

i have also divested myself of much of my california real estate. until and unless the state turns red, i want to own as little real estate as possible.

i am content to invest in very safe trust deeds. i dont want to spend a big portion of my time on money issues. i cant take it with me

If you are waiting for California to turn red, you should expect to wait a long, long time.

 

[TrustUser]

LOL - i aint holding my breath, that's for sure !!

 

[quincy]

Wise.

 

[davew9128]

thanks for the input. my model had included keeping them over a year, so they could be long-term. i was never gonna live in any of them. but had it worked out, i guess i would have had most of my income from them. i dont have any normal work income. whatever i make is mostly from investments.

Holding multiple pieces of real estate for a year, when the goal all along was to rehab and flip for a profit, is almost certainly trade or business income subject to self employment tax, not long-term capital gain, regardless of how long you hold it. The people selling these schemes don't tell you that...

 

[quincy]

Holding multiple pieces of real estate for a year, when the goal all along was to rehab and flip for a profit, is almost certainly trade or business income subject to self employment tax, not long-term capital gain, regardless of how long you hold it. The people selling these schemes don't tell you that...

TrustUser was planning to keep the houses for at least a year, renting them out.

 

[TrustUser]

it is certainly a debatable issue. however, length of term does play a role. also the amount of involvement was a crucial point. i had almost none. my role was to hand over the money, pretty much the same as i do when i invest in a hard money loan. so i felt i had a strong case for it to be considered as investment income. i specifically was not interested in making this another job for me. i retired, for a reason - LOL.

it is a moot point for me, at this point. it is very difficult to make any sort of profit at all, if you dont have a full set of workers that will come when you call.

 

[davew9128]

TrustUser was planning to keep the houses for at least a year, renting them out.

Doesn't change my answer. Incidental rent while held for sale doesn't change inventory to a long-term holding.

 

[quincy]

Doesn't change my answer. Incidental rent while held for sale doesn't change inventory to a long-term holding.

I didn’t expect you to change your answer.

I agree with you, TrustUser, that buying up homes to either fix up and flip, or fix up and rent out, is not an easy way to make money.