Rehabbed a foreclosure. What now?

Question

I recently purchased a foreclosure. This house was late 2017 new construction and sold as just the shell. The house is almost finished and I planned to live in it but we all know things come up and life happens. I may or may not have to relocate myself in the near future but would like to understand my options with this house. I see a lot of potential with it. It is a beautiful home in a great location.

As a first time buyer I hear many suggestions but would like to turn to the BP community for some feedback! Anything will help!

Tim Johnson · Answer

Find a realtor and sell it.  Move on to the next one

Tom Wagner · Answer

@Basit Siddiqi thanks for clearing that up Basit!

Tom Wagner · Answer

@Teri S. Thank you Teri!

Basit Siddiqi · Answer

@Tom WagnerIt doesn't seem like your intent was to buy and immediately sell the property; which would suggest that it not necessarily a flip. This would mean that it is not ordinary income subject to your marginal tax rate, state tax rate and self-employment tax.However, you should get with a professional and items such as date acquired and intent will be important to determine if it is a flip subject to ordinary income or a capital asset subject to capital gains tax rates.

Teri Feeney Styers · Answer

@Tom Wagner now is the time to get your CPA involved - before you do something you can't undo. Yes, if you live in the house for less than two years you will be subject to short term capital gains which may be less tax wise than "income" (as @Cody DeLong stated). However, if you never live in it and sell it then you can write off the costs of that sale such as Realtor fees, title insurance, etc. - you need to decide which would be most beneficial to you...

Tom Wagner · Answer

@Cody DeLong thanks Cody.  just trying to understand what you mean. can you break that down for me?

Cody DeLong · Answer

@Tom Wagner Capital Gains is less then wages as you won’t have to pay SS or Medicare. I’d live in it even if for a month and rather get capital gains then income.

Tom Wagner · Answer

@Teri S. Hey thanks for the feedback Teri. That clears things up a bit for me!

Teri Feeney Styers · Answer

@Tom Wagner -  If you sell it, then essentially this became a flip and is not subject to capital gains. Instead it is regular income. You never lived in it. If you sell in 2019 then you take the income from the sale minus the expenses of owning and rehabbing it and the balance is your "income". Yes, you can go all the way back to the costs of 2017 and include them (if you haven't already done something with them tax wise).

Rehabbed a foreclosure. What now?

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