Real estate investment is a successful method for amassing wealth and securing long-term financial security. Real estate investors can generate income through capital gains, for example. In this blog post, we’ll explain what capital gain in real estate is and how it works.
What is capital gain in real estate?
Capital gain in real estate refers to the profit made from selling a property for more than it was originally purchased. It is the difference between the purchase price and the selling price. For example, if an investor purchases a property for ksh20,000,000 and sells it for ksh30,000,000, the capital gain is ksh10,000,000.
How does capital gain work in real estate?
Real estate capital gains are subject to the same rules as other types of investments. When an investor sells a property for more than they purchased for it, they make a capital gain. The capital gain is subject to capital gains tax, which is a tax on the profit made from selling the property.
The amount of income the investor makes and how long they have owned the property are just two factors that influence the capital gains tax rate. If the property was held for less than a year, the capital gains tax rate is the same as the investor’s income tax rate. If the property was kept for more than a year, the capital gains tax rate is normally lower than the investor’s income tax rate.
How can investors minimize capital gains tax?
Investors can choose from a number of strategies to lower their capital gains tax. To qualify for the lower capital gains tax rate, one common strategy is to hold onto the asset for at least a year.
The profit realized from selling a piece of property for more money than it cost to purchase it initially is referred to as a “capital gain” when discussing real estate. It is taxed on capital gains, which can be minimized by employing strategies like holding onto the property for at least a year after selling it. By employing these strategies and understanding how capital gains in real estate function, investors can increase their earnings and amass wealth through real estate investment.