Could house flipping in California soon become a thing of the past? The answer to this question is yes, especially if AB 1771 is approved.

What is AB 1771? It’s a proposed 25% tax on the sale of recently purchased properties in California, that could effectively kill a thriving industry which has been a major part of the California real estate for years.

How Will AB 1771 Work?

Authored by Assemblyman Chris Ward D-San Diego; AB 1771 would impose a 25% tax on investors if they sell a rental property within three years of buying it.

This means that investors in California who have made millions over the last 10 years flipping houses, would have to be willing to hold onto their residential properties for at least 7 years if they wanted to sell their properties without paying the additional tax.

Will This Help California’s Housing Supply?

Everyone knows that California faces a housing supply problem because builders are not able to build enough supply to keep up with demand, but the big question is will AB 1771 solve this problem?

Assemblyman Ward feels that this bill will help California take a step in the right direction because he feels that house flipping if it’s allowed to continue unchecked, contributes significantly to higher housing costs state-wide.

The goal of the bill is to discourage investors from seeing real estate in California as a short-term equity gain, but it doesn’t solve the supply/demand issue that has plagued California’s housing market for years.

Short-term speculation (house flipping) has been one industry that’s kept California’s economy going, and by adding more taxes on investors, this bill may only continue to drive investors away instead of encouraging them to invest their money in California real estate.

Contact Golden West Management

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