Flipping of house is a distinct approach to investment in property. It is a wonderful means to make money. This approach has its own share of pros and cons. Before you plan to adopt this investment strategy, it is advised to read about its advantages and disadvantages.
One Mortgage and No Carrying Costs
Buying a property generally implies that you are purchasing it in addition to an existing property in which you are currently living. In this type of investment method, you are responsible to pay for the carrying costs related to the property. These costs can include property taxes, monthly mortgage payments, utilities, insurance, realtor commissions, property maintenance, and closing costs.
All these bills apply to your existing primary residence too. So, you need to pay these bills on both the properties. But if you plan to stay in a home that you are flipping, then you are entitled to pay these expenses only once.
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Save on Taxes
You can avoid to pay capital gains tax when you live in the property for a minimum of 2 two of the last 5 years after purchasing the property. As per the “Section 121 Exclusion”, on selling your home, you can prevent tax payment on $250,000 of capital gains if you are filing tax as an individual or capital gains worth $500,000 if you are filing your tax in joint form along with your spouse.
Less hurry to sell the house fast
In a conventional property flip, the aim is to buy, renovate and sell it quickly. In such a scenario, it is very stressful when you can’t find a cash buyer. Till the time, your house gets sold, you will be responsible for paying all the mortgage and other types of expenses on your property. On the other hand, if you are living in a home that you are wishing to flip then you don’t incur secondary expenses. So, there is no hurry to sell the house.
As you are not in a hurry, you can take time to negotiate on the contractor pricing and renovation material. With no time crunch, there is plenty of time in your hand to shop around and get the materials at the best price.
As you have a good amount of time in your hand, you can do a few jobs on your own without taking help of a licensed professional. This way you can save on money too. For this, you must consult with authorized committees to determine for what tasks you are legally permitted to do yourself and for what projects you need to hire a certified professional.
Before you take on any investment strategy you need to take some time and consider the features of that strategy. Flipping residence investment strategy also has benefits and drawbacks. Learning about them will help you in making the right decision.