Will I be considered a dealer by the IRS?

[Levi Hui]

Hi guys, I am new here. 

I haven't started investing in real estate yet, but I plan on doing so as soon as I turn 18. I was just wondering would I be marked as a 'dealer' by the IRS if I was to buy distressed properties, renovate them, rent them out and sell them in a year or two? Basically what im asking is will STBH(short term buy and hold) or value add investing be considered a dealer and if so, are there ways I can avoid this?

Thanks in advance 

[Will Fraser]

Hi @Levi Hui, welcome to the BiggerPockets community!  

TBH I'm not sure what you mean by "dealer."  I've not heard that term used in housing before, so I'll dive into a different aspect of this and hope to add value.   When you buy a home, rent it, and then sell it 2 years later you're going to be looking at capital gains, but a long-term cap gains based on my understanding.  If you had lived in that home as your personal residence for 2 out of the past 5 years, then it is tax exempt (up to a certain limit), but since the home in question was a rental property only, it would be subject to LT cap gains.

If you keep doing this, you keep paying the capital gains taxes, but I don't believe there is any magic thing that happens in the IRS' eyes if you keep doing this model.  That's basically what happens when you buy rental properties at scale . . . 

Is there more detail you can share to the "dealer" idea you're curious about?   Hopefully some of what I shared was useful :)