Taxes can be a confusing topic. There are just so many things that you will need to claim on your taxes and this can make things a bit confusing. When you work just a regular job and have your income taxes taken out of your paycheck each pay period, it is a lot easier to work on the taxes compared to those who work two jobs or work from home to make their money. One way that you can make a little bit extra money on the side, or even turn it into a full time income, is to flip homes.
With flipping homes, you are making the home purchase with the idea that after some fixes and maintenance, you will either sell the home or use it to rent out. This is a great way to make some money, but since you are not living in the home and using it as your own, the IRS will expect you to claim this money as income. If you are considering flipping homes for an income and would like some help getting it all started, make sure to speak with your local tax professional to ensure that you understand what is all going on with this process.
Picking the Right Home
Picking the right home is often one of the most difficult things that you can do during this process. You need to find a home that is a really good deal and won’t take a lot of work to get up and looking nice. If the home is too expensive, you are going to have trouble selling it for a profit in the upcoming months. On the other hand, it could be for a great deal but if you have to spend thousands updating it, you are not going to get the money back.
You should take your time during this process and even consider working with someone in the business. This can help you to make the right decisions through this process so you are not picking a property that will cost you more than it is worth and you can actually make a profit off the work you do.
Making Repairs and Selling
Once you have made a selection about the home that you would like to work on, you need to get to work. You should already have a good idea of the repairs that you need to make and how you would like to get them done. Many people who are in this process will do as many of the repairs as possible since this can save a lot of money, you only need to purchase the supplies instead of paying for labor, and you can save time by not having to wait for a contractor.
During this time, remember that you need to work fast. The longer you are holding onto the property, the more it is going to cost you. You still have to make mortgage payments while you own the home and since it usually takes a few months just to sell the home, you have to move quickly during this phase.
After you have made the repairs it is time to sell. You can choose to sell your home on your own or hire a real estate agent to help you out. Make sure that you are offering a fair price for the home. While you may like to make a huge profit, the home is just going to sit on the market for a long time if you price it too high.
During this process, make sure to keep some good records. You need to know how much you spend and how much you earn from each house to accurately show this on your tax return at the end of the year.
Keeping Good Records
It is really hard to do a good job with your house flipping business if you aren’t doing a good job keeping up with your records. Many people can fail in this business simply because they have no idea what is going on with their finances and where they are losing money. Before even getting started, make sure that you find a decent method of record keeping. This will ensure that you can see how much money you are spending on the property and whether or not it is a good venture for you in the first place. Once it is time to sell the home, you will need to have these records to help you figure out a fair market price for making the sale.
If you are having trouble keeping track of all the records and how much you spend for your business, you need to consider hiring a tax professional. They can help you out with any of the record keeping tasks that you need, no matter how big or small, so you can concentrate on running your business rather than worrying about the book work all of the time.
Hiring a tax professional can be one of the best things that you can do in your day. They will be able to help answer all of your questions, help out with some of your record keeping during the month, and even help you out with some of your tax issues at the end of the year. Contact our offices to get started with one of our tax professionals today.
Johnson, Johnson & Associates, Inc.