The High Heeled Ruminations Of Melrose Plant

[CrushedVamp]

On 12/15/2025 at 5:05 AM, Puffer said:

From what you now say, the US tax position is very similar to that of the UK: (i) no tax on any profit on the sale of a primary residence; (ii) capital gains tax on any profit on the sale of any other property, after deducting all acquisition, improvement and sale expenses.

You are, with respect, deluding yourself if you ignore the cost of the capital invested in a property bought for refurbishment and resale, whether you borrow the money or use your own accumulated funds.  To take a simple example:   you buy a 'doer-upper' for $100,000, spend $36,000 more evenly over the next year ($3,000 at the start of each month) in refurbishment and sell it at the end of the year for $200,000.   Your apparent profit is $200,000 - $100,000 - $36,000 = $64,000.   But, if you borrowed the money at (say) 6% interest, you would have had to pay out a further $7,170 to cover the borrowing: $6000 on the initial $100,000 and $1,170 on the progressive refurb costs.   So, your true profit is really $64,000 - $7,170 = $62,830.   Alternatively, if you funded everything from your savings (as indeed you prefer), which would have earned you 5% per annum if left invested, you are worse off as you have 'lost' interest income of some $5,975, so your true profit would then be $64,000 - $5,975 = $58,025.    There could well be a situation where a longer than expected period of ownership arose (because the refurb took much longer or the property would not sell quickly) and the extra interest cost (notional or actual) took a big chunk out of the profit or even eliminated it.

Oh for sure… the greater the risk, the greater the reward, so sitting on real estate can be scary, but time everything well, and it can work well to your advantage too.

Years ago, a person would buy a home to live in it, and now that notion is gone and so people buy and sell homes in order to work the most equity out of a place. My wife and I have bought and sold (7) properties in the last four years but it is not our main form of income.

You are right too in calculating in interest gained from your own money. It works a little different for me and my wife, but yes, if we took the same money and invested it into a certificate of deposit for instance, we should off-set those gains in a guaranteed way. To be fair, it would have to be a CD or something guaranteed because while there are other higher forms of investments, there is no guarantee you would pick one that gained instead of loss.

In looking right now, the best CD rate is for 12 months at 4%. So instead of putting $50,000 in a house over two years, we could put it in a CD for a year and then redo the CD again and get $4000 extra. So at the end of two years, we would have made $54,000.

We would be silly to do that though because you are failing to calculate one important point… you have to have a place to live. With a house, you live there rent-free AND make $70,000 in financial gain in two years. If I rented an apartment I would have made $4000 on my $50,000, but also spent $24,000 on rent over the same past 2 years.

But it is even worse if you live in a forever-home and never sell it. All those improvements needed for the home over the years, never get deducted so it really ends up costing the homeowner a huge amount of money. It is $50,000 spent over 20 years instead of 2, but it can never be deducted because the owner dies before they sell.

And that is the real price for constantly buying and selling homes: you never get to live in a nice home that is all fixed up. Once it is nice, you pick up stakes and move on. You are not paying a mortgage or rent, and making investment money too granted, but only because you are constantly doing work on the place.

There is no such thing as a free lunch…

[mlroseplant]

I had never really considered buying investment houses and actually living in them. That would certainly be a good way for us to get rid of a lot of junk (all three of us tend toward being hoarders). But that's not how I roll. I'm going to die in this house. I like it here.

Speaking of free lunches, I'm scheduled to get one tomorrow at work. With any luck, I'll get laid off the next day. With less luck, I won't get laid off the next day. Either way is fine.

[Puffer]

27 minutes ago, CrushedVamp said:

...

Years ago, a person would buy a home to live in it, and now that notion is gone and so people buy and sell homes in order to work the most equity out of a place. My wife and I have bought and sold (7) properties in the last four years but it is not our main form of income.

... you are failing to calculate one important point… you have to have a place to live. With a house, you live there rent-free AND make $70,000 in financial gain in two years. If I rented an apartment I would have made $4000 on my $50,000, but also spent $24,000 on rent over the same past 2 years.

But it is even worse if you live in a forever-home and never sell it. All those improvements needed for the home over the years, never get deducted so it really ends up costing the homeowner a huge amount of money. It is $50,000 spent over 20 years instead of 2, but it can never be deducted because the owner dies before they sell.

And that is the real price for constantly buying and selling homes: you never get to live in a nice home that is all fixed up. Once it is nice, you pick up stakes and move on. You are not paying a mortgage or rent, and making investment money too granted, but only because you are constantly doing work on the place.

...

17 minutes ago, mlroseplant said:

I had never really considered buying investment houses and actually living in them. That would certainly be a good way for us to get rid of a lot of junk (all three of us tend toward being hoarders). But that's not how I roll. I'm going to die in this house. I like it here.

...

There is clearly scope to make a tidy profit (potentially tax-free) by 'flipping' houses bought, lived in and refurbished, before selling and repeating the exercise.  A person with sufficient skill (or good contacts) can do or manage the refurb himself, possibly full-time, and thus derive a fair income whilst having a place to live in rent-free - but not free of other outgoings.   And the cost and disruption of buying/selling/moving every year or so is quite daunting and not to be undertaken lightly.  It is certainly not something I would wish to do - and I've lived in my current house for 26 years, steadily improving it where necessary.   In theory, it is my 'forever' home, but my wife and I will probably have to downsize at some point - something I dread.   As to never realising the enhanced value of both impovements and inflation - in my case around 400% in all - that is academic whilst we still have the security of a comfortable home.   When the second of us dies, our five sons will inherit a tidy windfall - assuming that the government has not taxed it out of existence.

As to the ongoing cost of a second home, such as that I bought in 2011 and refurbed steadily over the next four years, the outgoings (council tax, insurance, utlities, minor repairs and (not to be overlooked), interest on capital), the total represents the 'rent' for the use and enjoyment of that second home - around £8,500 ($11,300) p.a.   Not a small sum and one which some would not consider worthwhile, even if the property was used regularly.   As we have made less use of ours in the last few years - particularly as our sons and their families are now living further away - and maintenance has become more of a chore, we decided to sell, although are currently letting it.   We don't need the capital that would arise on sale, but our sons will benefit at a time when they have a need to move to larger homes with their growing families.