House flipping in Canada has real potential to be very, very profitable. It takes extensive planning, however. There are tax considerations to house flipping, regulations, and many variables in the real estate market that can impact what you can do with your property when you can sell, and how much profit you earn.

House Flipping Is Not Easy Work

Real-life house flipping is nothing like what you see on HGTV. It’s hard, hard work. In essence, house flipping is a business. It involves maximizing the value of an asset that, at any time, can lose value for reasons completely out of your control.

Thinking about flipping a home? You’ll want to check out these blogs next!

Know Your Profit Margins

Despite house flipping being occasionally very hard work, the profit margins can be high. The average return on investment for house flipping in Canada is 44.4% or an approximate dollar value of $64,000. The majority of buyers want a move-in-ready home. In giving a buyer that, however, you want to be smart about your spending and know your profit margins.

Where You Buy Matters

Even if you have developed a truly exquisite piece of real estate, if it’s in a neighbourhood no one wants to live in, that’s a problem. Always seek out real estate to buy in neighbourhoods where there is strong appreciation and fundamentals in place that support long-term value, such as South Etobicoke.

Wait For At Least 1 Year To Sell

When you buy a property and resell it within 12 months, it is then classified as business income and not capital gains. If you wait past the 1-year mark to sell, only 50% of your property sale is taxed under capital gains.

Carrying Costs Of Homeownership

While a property is under your ownership, there are carrying costs, including annual property taxes. Any sort of maintenance or issue with the property also falls under your purview to fix, driving up expenses.

Costs Of House Flipping Renovations

Yes, there are acquisition costs to house flipping meaning you have to scrounge up the financing to buy. From there, there are the many costs of renovating and making upgrades, including potential overruns. The higher these run, the more into your house-flipping profitability they will eat.

Hoping to buy a profitable investment property? Check out these related blogs for more insights.

Consider It As Your Primary Residence

When you use the property as your primary residence, this changes how such a sale is taxed. There is the principal residence exemption that may reduce or eliminate the capital gain tax and all associated income taxes on the sale.

Market Volatility Influences Sales Price

Economic uncertainty and market volatility do not make for a pretty combination for house flipping. When the property is ready to sell, it’s key to know when to pull the trigger. A sale may have to wait for a better time if the market is not where it could be and how long you have to wait is a hard question to answer.

Make Strategic Decisions

Do not jump the gun or go into a house flipping situation without having studied up and having your ears open.

  • Consult with real estate agents, home renovation contractors, and real estate lawyers on how to maximize profitability.
  • Stay informed on current house flipping tax laws and regulations, ensuring you are operating legally.
  • Be diligent with your budget and how you spend on your house flipping real estate.

Consult the real estate team of Adrian + Andrea to look at high-profit homes for sale and find some of the best house flipping properties in Toronto. Call us at (416) 319-6893 or email us at info@adrianandrea.com.