When one is acquiring, perhaps rehabbing, and reselling property, this is a dealer activity* , not the type of passive investment income for which there are exceptions to UBIT as you note.* not to be confused with "dealer status", specific to real estate, which is an entirely different thing for after-tax investors The plan is buying and selling, and the property is the inventory of the sales business.  

You are buying and marking up and reselling things like a retail store would.

I can take the money and buy a home in the area for around $50k, put around $30k into it and resell it for $120-$130k while we live in it, allowing me to make more money out of the deal.

FCI exchange is a good place to look at notes for sale to get a feel... and I guess you could just do the old wholesaler trick find notes on FCI act like your a for real note buyer get them tied up then try to resell them for your little finders fee's..

My main focus that I'm looking to acquire (and the same basics are for my investors that I'm sending deals that are in our interest)Income producing properties7-8 million and up NNN or NN shopping centers and retail centers with a 8 cap and up (not proforma)Office buildings 8.8 cap but it depends on the area, We are very choosy with buying office buildingsMulti family we only bought 500 units and up (90% occupancy)We are trying to get financing 75 % LTV We are not buying land or small residential We focus on Northeast USA but bought nationwideWe only bought twice a foreclosure, But wasn't able to resell the property for the price that we wanted (NJ)From distressed owners we found a few times very good deals, and sold "as is" without putting to much money in the building for a very very nice profit(NY NJ PA CT)

As a wholesaler, you have to convince someone to sell you a house for less that its worth so you can mark it up and resell it.

ok, I am trying to think outside the box, regarding short sales, and how to resell them to FHA end buyers.

If you purchase and resell, then you can make a profit.

.- West Suburbs of Atlanta- 4/2 (listed as 3/2 on MLS) split-level built in 2003- Listed 2/10/2011 @ $50K- Offered $43K - Next day, bank asked for Highest and Best- Submitted $45K, all-cash, $5K EMD, close in 2 weeks- Bank "accepts" offer and sends an addendum with a price of $46K filled in, instead of $45K- Considering this is a slam dunk deal (requires about $12K of rehab and should resell for at least $100K), I quickly signed it and returned it- Expect to make between $25-30K profit in about 2 months, and since I'm borrowing 100% of the purchase + rehab from a private investor, the ROI should be infinite (minus the small time investment) Btw, my guess is that the reason this didn't go to an owner occupant is because the beck deck is in bad shape, and probably wouldn't have passed FHA inspection.

Are you attemtping to perform a Short Sale and then resell?