During the real estate boom with prices rising very quickly, “flipping” – buying a property and then reselling it at a higher price – was all the rage. It was a gold-rush mentality. Tens of thousands of people were getting into real estate.
With economic forecasts predicting a housing shortage by 2011, many people view real estate investing once again as more lucrative than the stock market. Furthermore, the tangible aspect of real estate is appealing to many people. Primarily because the property is “real” you can get a personal take on the house and neighborhood and determine whether it is a good investment.
During the real estate boom, many novice real estate investors went into real estate transactions completely uninformed. If you are not careful with your investment strategy, your strategy could cause a large payoff to an inadvertent partner i.e., the Internal Revenue Service.
Even informed real estate investors at times fail to realize the rollover provision does not apply to investment properties. Many investors also fail to compute the difference of short-term versus long-term gain. Often they are unaware of any tax consequence until it is too late and remain unaware of the many tax benefits which are available to real estate investors with the proper investment strategy.
Some investors may tell you “paying taxes means you are making money”. Still, there are ways to pay less tax and there are ways to get money from the federal and local government to increase your real estate investment portfolio.
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