Flipping as a Realtor or Investor

[Alex Grier]

Guy's I'm in class currently to get my realtors license. However, I'm starting to have second thoughts on the benefits to this as an investor; specifically a flipper. The primary reasons I wanted my license was to get access to our local mls and to avoid seller commissions. However, from what I understand you have to be part of a brokerage to get access to the mls and to sell a house. After the fees and due diligence of continued education it doesn't seem worth it and I'll explain why I have this opinion.

As a real estate professional I'm subject to a 15% self employment tax on any profits vs the 4% investors tax. After this is said and done the benefits I gain of avoiding seller commission fees is almost wiped out depending on the price of the house and the margins. Additionally, I'll be the one at the open houses and finding the leads onstead of another realtor. Please share your opinions and if there are any other benefits to investing as a licensed realtor.

[Brandon Hall]

Originally posted by @Stuart Birdsong:

@Brandon Hall

As a flipper, if your holding period is less than a year are you taxed as if it is Short term capital gains or as standard income?

Good question. A flip will always be taxed as ordinary income, regardless of how long you hold it. Some people say "hold for 12 months then sell" but they are wrong. The question always revolves around the intent of the transaction. Sure, if you hold longer you can better substantiate "investment" intent, but just remember it's intent that matters.

That said, if you flip a property but are able to demonstrate investment intent and have a hold period less than 12 months, it will be subject to capital gain tax rather than ordinary income.