I think back to some of my own real estate deals, and often when I am evaluating a property for a potential investment, I will go through several financial steps to figure out what it is worth, how much I can sell it for, how much money it will take to fix it up (if it needs repair), and consequently, how much I stand to make on the deal if I go ahead with it.
That’s all fine and dandy to do, but often times I failed to consider one ugly thing:
When selling an investment property, you have to consider property gains tax (in addition to income tax). As far as I know in the U.S. (and you’ll have to consult a tax professional on this), current capital gains tax on the sale of an investment property is 15%.
So just make sure when you are investigating an investment property that you consider all of the costs involved, and taxes are definitely one of those costs.