What is Real Estate Transfer Tax?
A transfer tax is charged by state or local government when real estate changes hands, paid at closing — typically 0.1-2% of sale price. Rates vary dramatically: Texas and Mississippi have no transfer tax; Pennsylvania charges 2%+ in many counties.
Transfer tax is usually paid by the seller in custom but is freely negotiable. In many states it's a flat percentage of sale price; in others (NY, NJ, PA) it stacks state + county + city components that can exceed 4% in urban markets.
For investors, transfer tax materially affects net proceeds from a flip exit and should be modeled in the 70% rule calculation. A 1% transfer tax on a $300k flip is $3,000 — small but it adds to the 6% agent commission and 1-2% title costs, totaling 9-10% of ARV in exit friction.
States with no transfer tax (Alaska, Idaho, Indiana, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon, Texas, Utah, Wyoming) are meaningfully more flipper-friendly all else equal. California has no general transfer tax but counties charge $1.10/$1000 + cities can add more.
Concepts that connect.
Closing costs are the fees paid at the closing table to complete a real estate transaction — title insurance, lender fees, recording fees, transfer taxes, prepaid escrows, and attorney fees. Typically 2-4% of purchase price for buyers, 1-3% for sellers.
Flipping is the strategy of buying a distressed property, renovating it to retail standard, and reselling at full market value within 4-9 months. Profit comes from the spread between all-in cost (purchase + rehab + carry + closing) and net sale proceeds.
The 70% rule is a flipper's underwriting heuristic: total all-in cost (purchase + rehab + carry + closing) should not exceed 70% of the property's After Repair Value. The remaining 30% covers profit, slippage, and the cost of being wrong.
The Weekly Deal Memo
One market memo, one off-market playbook, one tool review. Every Friday. Free.
No spam. Unsubscribe anytime.