What is a “slow flip”?
A slow flip is when someone purchases a property and lives in the home between two to five years during renovations and repairs with intentions for selling for a profit.
Slow flip investing can be incredibly profitable!
As the name implies, similar to a fix and flip, the goal for a live-in investor is to realize investment income (profit), but with a long term approach.
There are many benefits, including the fact that your mortgage payments could be mitigated by realizing a profit when it sells. Additionally, unlike rent payments, purchasing a home comes with tax advantages while you live there in the way of mortgage interest tax deductions.
The main benefit of a slow flip property is realized after it sells, regarding the advantage related to capital gains. Typically when you sell a home, you will pay tax on the sale’s profit, meaning the difference between the original purchase price and the selling price with all the added closing fees and pay-offs.
Traditionally, you would pay a capital gains tax on the amount of profit from the sale of the home. However, with a slow flip, profits (up to $250,00 filing single and $500,000 for married couples) will not be taxed.
The potential draw back to this strategy is that you might be living in a construction zone for a little while, and that can feel unsettling.
With the slow flip strategy, you’ll likely realize a higher profit, if done well, because of the repairs, renovations, and improvements. Within some limitations, you will not be taxed on the capital gains that sell, meaning more money in your pocket.
Isabella
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