I'm a new real estate investor who is starting to flips homes. I'm doing my taxes now and need to know (in a simplified form):
I purchase a house for $50k ($20k borrowed & $30 my own money)
Paid $20k to renovate
Sell it for $100k
Do I write off the $20k loan I need to repay so my net income is $10k or I don't write off the repayment of loan so my net income is $30k?
$100k sale price
$ 50k cost of home
$ 20k renovation cost
$ 20k repay loan
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$10k profit
or
$100k sale price
$ 50k cost of home
$ 20k renovation cost
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$30k profit

Your net profit on the sale of the home is: $30K. $100K(selling price)-$20K(mortgage payoff)-$30K(your own investment)-$20K(renovation/repair costs)- You also need to subtract the amount of any unpaid real estate taxes that you'll either have to pay before the sale or credit to the buyer's account, attorney fees associated with the sale, title insurance costs, mortgage release processing (confirms that the mortgage is paid off) and survey costs. Also seduct your real estate agent's commission from that figure to determine your final estimated profit .Your agent provides you with a summary of these costs or etc.