I get a lot of questions about the $8,000 tax credit and how it can impact real estate investors. There is a major benefit to buying an investment property, fixing it up and then market it using slogans like “take advantage of the $8,000 tax credit while you can!” BUT first you need to understand how the opportunity works:
The credit was scheduled to end on December 1, 2009, but President Obama signed an extension making the credit available through June 2010. But there’s one condition! The buyer must sign a contract by April 30, 2010 and the property must close by June 30, 2010. The president also raised the income limits: single buyers can now earn up to $125,000, and still get the full benefit while married couples can earn up to $225,000!
Previously buyers were required to be a “first time buyer” (meaning a buyer who has not owned a home in the past 3 years), but now people who want to trade up and purchase a more expensive house can also qualify. However, they are required to have owned and lived in a house for 3 of the last 5 years, they can only claim $6,500 if they close by June 30.
When our investment houses are purchased to rehab and sell, the investor often sells the house to a buyer who qualifies as a first time homeowner. Most of these houses are bought at a wholesale price of $60-80K and sold in the retail $130-155K price range. The $130-155K price range is a price point that brings a lot of first time homeowners, so make sure you understand the tax advantages!
Include the tax credit in your marketing! You will likely sell your house faster, and you will help a first time homeowner not only take ownership of a house, but save some money doing it!