Short Term Rental....

[Jake Kozul]

I am looking to rent out a house I am going to renovate and flip in the Spring, but would like to keep the rent coming in as it is a solid house that just needs upgrades. Has anyone run into this scenario and have advice as to my options. 

Thanks

[Dave Foster]

@Jake Kozul, Exactly what @Mark Perlberg said.  If your intent is primarily to sell the property (fix n flip) then when you sell you will pay ordinary income tax on the sale and do not have the option to do a 1031 exchange and defer all tax.

If your intent is to hold that property for investment use (like you suggested - actually rent it and enjoy the income) then it would qualify for a 1031 exchange.  And you can then sell the property and using the 1031 process purchase new investment property to hold for productive use (and maybe sell after a while).  

There is no statutory holding period that qualifies for 1031.  It is all about intent.  Most folks feel comfortable with anything more than one year.  but there could always be circumstances where a hold of less than (or more than) one year would be appropriate.

If you have the ability to slow down the flips a bit you'll be able to turn 30-40% tax into 0.