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Profit is defined as the amount of money that is made after deducting expenses and taxes from a specified business activity. In terms of real estate investment, Profit refers to the amount of money that one gains after selling a property, minus the amount of money used to purchase it. Funds that were used to fix it up and/or sell that property must also be taken into account. It is incorrect to just take the value that the property was sold for and subtract the value that was paid for it. To calculate the Profit, one would need to use all of the costs involved when subtracting from the sale price. These costs could include (and are not limited to) taxes, insurance, closing costs, property maintenance fees, legal or accounting fees, landscaping fees, homeowners association fees, or any other cost that may have been incurred in relation to this property. For example, an investor purchases a property for $100,000 and sold this property for $200,000. It would be incorrect to calculate a $100,000 Profit. That investor would need to calculate all of the costs that were incurred while he or she owned the property as well. Lets say the investor spent $30,000 on renovations, paid $1,800 in taxes and insurance, and $1,200 in legal fees. You would take the $200,000 sale price and subtract $133,000 (the total of the purchase price and subsequent costs), which would yield a $67,000 Profit.
