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Tax question re Hard $ lender

August 24, 2011 05:14PM
Hello all,

This topic got me thinking of the tax implications of this situation.
My understanding is that the hard money lender (hml), is putting up money to facilitate a property being flipped.
And will be compensated with a % of the net profits.
But the invested funds will be in the form of a mortgage or deed of trust, not as a co-owner or purchaser.

For the hml, is his profit taxed as interest from a mortgage?
And not as a short term gain on the resale of the property.
Are these two different sources of income taxed at different rates? (I think so)

If so, then my real question is, is it better for external investors (who don't manage the rehab nor disposition of an acquired property)
to invest in "flipping properties" as mortgage lenders? At least for tax purposes?

Subject Author Views Posted

working with rehab purchase

Hard Money Lender 5510 August 12, 2011 12:13AM

Re: working with rehab purchase

Verve 3265 August 12, 2011 09:08AM

Re: working with rehab purchase

Hard Money Lender 3868 August 12, 2011 10:26AM

Tax question re Hard $ lender

jd 3045 August 24, 2011 05:14PM

Re: Tax question re Hard $ lender

Hard Money Lender 3061 August 26, 2011 09:10AM

Re: Tax question re Hard $ lender

jd 3090 August 30, 2011 02:52PM

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