Home Buying in 60634>Question Details

Luke, Real Estate Pro in Chicago, IL

Hello my Trulia friends. I'm planning to buy a second home for investment. Then remodeled (flipping)and sell it in a few months.

Asked by Luke, Chicago, IL Sat Nov 16, 2013

My question is: Do I have to wait 6 months to put it on the market if I finance? What about Tax Consequences?
Thank you!

Help the community by answering this question:


You might want to talk to an accountant, but when you sell within 12 months you pay short term capital gains tax which is more than long term capital gains tax. Financing has nothing to do with flipping unless it is an FHA loan.
I would wait more than 12 months or even better, rent it out for a while or call the 2nd home your primary residence and wait 2yrs and then sell to avoid any capital gains tax. What is the rush? The market is improving so time is on the side of the seller. Sounds like a lot of work for little $$$ by flipping so fast.
1 vote Thank Flag Link Sat Nov 16, 2013
No you do not have to wait; we have a product that the terms range from 3 to 36 months.

Fast closings as well with this product.

Chris Diamond
Diamond Residential Mortgage Corporation
NMLS 771882
0 votes Thank Flag Link Wed Feb 12, 2014
While the advice to "check with the lender first" is good, I'd take it a step further. Get a loan designed for rehabbers or flippers. You'll pay a bit more in interest (which won't really amount to much) and probably some points. Still, the loan will be designed for what you're trying to do...which is a much better place to begin than trying to find some loan product not designed for what you're trying to do.

A good Realtor--especially one who works with investors--should be able to suggest some lenders to contact who handle precisely the type of loans you're looking for.

Hope that helps.
0 votes Thank Flag Link Tue Feb 11, 2014
Don Tepper, Real Estate Pro in Fairfax, VA
The right mortgage broker will be able to find a couple of viable options for you.

As far as I know, FHA requires that you live in the property.

I have a great mortgage broker at Wintrust Mortgage who can help you. Just call me at 847-533-7115

John Meyers, Meyers Realty
c: 847-533-7115
e: JohnMeyers@MeyersRealty1.com
0 votes Thank Flag Link Fri Nov 29, 2013
Call me to discuss any questions on the matter. The short answer is there can be depending on the type of financing product and also the lender who is liable for the reps and warrants of the servicing or performance on the loan. In truth on residential financed loans, prepayment penalties are illegal for a lender to impose on a qualifed mortgage or residential housing product.

Chris Diamond
Diamond Residential Mortgage Corporation
NMLS 771882
0 votes Thank Flag Link Thu Nov 21, 2013
Many great answers. Reiterating here, just talk to the lender you are using to get a better idea. Depending on how long it will take you to close, the FHA buyer may have some limitations.
0 votes Thank Flag Link Tue Nov 19, 2013
You can sell the home whenever you want unless there is a restriction by the lender. Oftentimes it will be on the Title w/ a 90 day period. As per tax consequences talk to an accountant -- It will likely be looked at as a short term capital gain.
0 votes Thank Flag Link Mon Nov 18, 2013
it will depend on where/how you're buying the property...In most cases there is a seasoning period unless you are buying off market properties that have already been sitting and if you pay cash.

either way you need to speak to several lenders

call me and we can chat 312 493 8446
0 votes Thank Flag Link Mon Nov 18, 2013
While FHA will allow quick resales (as soon as you want), not all banks that do FHA loans will do them in the first 90 days. In other words, some banks still adhere to the old FHA guidelines, even though FHA doesn’t require it. There are a lot of banks that will now do FHA loans immediately, so ask around to a couple loan officers or brokers and find a bank or two that will do an FHA loan without any time restriction; most of the regional banks will do these, but even big banks like Wells Fargo are now doing them. So, just because one or two banks say no, don’t give up.
If you plan to resell within 180 days, expect that you will need to have two appraisals on the property. Also note that the second appraisal can’t be paid for by the buyer — so either you (the seller) will need to pay for it, or the broker/lender will need to pay for it. This should be negotiated upfront so there are no surprises.
If you plan to resell within 180, expect that the lender’s underwriter will require you to furnish details of the rehab. This may include renovation details, invoices, receipts, etc — anything to substantiate the work you’ve done.
If you plan to resell within 180 days, you will need to do enough improvements to justify the higher resale price. There are no specific guidelines on how much work you must do, but if the appraiser or underwriter feels that you haven’t done enough work to justify the new resale value, your appraisal will likely come in low, regardless of comps.
If there has been a “pattern of flipping” (in this case, that means there has been more than one title change other than an actual foreclosure) in the past year, the lender will likely reject the loan and you may be required to wait 6-12 months to resell to an FHA buyer. This often occurs when an investor purchases from a wholesaler, rehabs and then plans on a quick resale — there are two title changes from the wholesaler to the flipper to the end-buyer, which will be a red-flag for an underwriter, so be aware of this potential issue when buying from wholesalers.
0 votes Thank Flag Link Sun Nov 17, 2013
Hello David,
What about Conventional loans?
Flag Sun Nov 17, 2013
You need to speak with your accountant regarding the tax ramifications to your particular situation. But on the flipping end, the longer you wait, the more it takes from your bottom line in carrying costs, like interest, mortgage and property taxes. You will have to get two appraisals on the property for a buyer with an fha loan if you have owned less than 6 months, but small cost by comparison to the carrying costs. That can eat your bottom line and needs to be factored in.
0 votes Thank Flag Link Sun Nov 17, 2013
Hi Luke ,

YOU DON'T HAVE TO WAIT 6 MONTHS !If you finance ...you have to tell the lender what you have in mind and make sure the loan what you going to have will not stop you to resell the property anytime you want (No prepayment etc). When you sell the property if it is under 6 months the buyer will have most likely 2 appraiser if finance Fha.

As far as tax consequences talk to a good cpa!
0 votes Thank Flag Link Sun Nov 17, 2013

You need to speak to your lender. I would imagine you are going to have short term capital gains on the sale. You might be able to offset your gains with capital losses, if you have any...

0 votes Thank Flag Link Sun Nov 17, 2013
From whom are you purchasing this 2nd home? If it is a foreclosure property, then there may be some restrictions on reselling the property. As far as your tax consequences question, a Realtor who would answer that question is over stepping their area of expertise. That question should be put to your tax preparation professional.
As far as flipping the home in a few months or holding it for a year, that is a question that can only be answered on a case by case basis. It depends on your individual financial situation and the market characteristics of the property. That question would best answered by after you consulate with your Realtor and tax preparation professional.
0 votes Thank Flag Link Sun Nov 17, 2013
Hi Nicholas,
It's a short sale. I have a 90 days restriction on reselling the property. My loan officer told me that if I sell before 6 months he might have to return his commission :)
Flag Sun Nov 17, 2013
The only way to really know the answer is to speak to the lender your getting your loan from.
0 votes Thank Flag Link Sat Nov 16, 2013
Hello Luke-

You are getting basic answers here because you have asked a basic question. The answer you need is one based on your own circumstance.
If you have 15 minutes to talk, give me a call on Monday, and I will help you get a better picture of your choices, options on taxes and most importantly, go over how to get to whatever goal you have set for this project.

Dave Hanna (773) 732-9123.
0 votes Thank Flag Link Sat Nov 16, 2013
Speak with your lender - most loans will now have a 6 month recapture fee for the bank if you sell. Which means the lender will pay a penalty.
I am happy to help if you would like more information.
Sam Sharp
Senior VP of Mortgage Lending
Guaranteed Rate
0 votes Thank Flag Link Sat Nov 16, 2013
Rent it for a year and then sell it. Will most likely reduce the tax liability. I am not a CPA and this is just my opinion. You would be best served seeking out a CPA and also an estate planner. Good luck!
0 votes Thank Flag Link Sat Nov 16, 2013
Depends the type of financing and depends of capital gains
0 votes Thank Flag Link Sat Nov 16, 2013
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