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Making a business out of property ‘flipping’

Anyone who owns a television set can’t have helped but see the recent ‘bumper crop’ of programs about people who buy properties, fix them up and quickly resell them at a profit. If you’re the handy type or if you have an entrepreneurial spirit, the idea of ‘flipping’ a property for a fast return on your investment probably has some appeal. However, you may also be wondering how this scenario might work for the Canadian real estate market.

If you’d like to make a business out of buying and selling property, there are many different ways to go about it. Most people trying it for the first time will want to keep their existing job, at least while they’re getting started, or if you’re just thinking of ‘flipping’ as a sideline to supplement your usual income. The most profitable way to ‘flip’ a property is to have that home be your principal residence, so that you can avoid paying capital gains tax on any increased value you achieve on the property. Appreciation on your principal residence is not taxable. So, if you’re prepared to live in the property while you improve it and cope with the disruption and inconvenience of renovating while you’re living there, then this option is likely the best one for you. If you plan on owning more than one property at a time, talk to your lawyer or tax advisor before you buy. It may be more advantageous to put the title under a different name, for example that of a spouse or another family member, to avoid paying unnecessary tax.

If you are planning on buying a home for a quick return, make sure you share all your goals with your real estate agent. They can counsel you on what areas are up and coming and stand a good chance of appreciating at a higher than average rate. They’re also experts on what home buyers are looking for in a home, so they can advise you on what improvements are likely to give you the best return. Kitchens and bathrooms are the two rooms of the house that generally give you the best bang for your renovation buck, but there are countless options to consider. We can help you weigh your options to make an informed choice

Remember too that market changes should be reflected in your planning. Canadian property values are expected to continue to rise in 2007, but the growth rate is expected to be more moderate than the double-digit price increases we’ve experienced in recent years. For 2007, the national average increase in house values that has been predicted by the Canadian Real Estate Association is 6%. Some of the best increases are expected in Western Canada, particularly Alberta, so that means some markets in other areas of the country will see even more modest appreciation in value. We can help here too, with up to date pricing information on your local market and valuable information to help you predict where the market is headed. Then you’ll be ready to use that information to your best advantage.

Posted on Saturday, January 6, 2007 at 08:39PM by Registered CommenterElaine | Comments2 Comments

Reader Comments (2)

Your personal house flipping coach, the FlippingHomes.com blog represents a true community of investors who flip real estate.
August 11, 2007 | Unregistered CommenterJohn
I don't think that your information is up to date here... if you are planning on making a business out of flipping property - and it is your only form of income - then you are subject to taxes... even if you live in it during the renos, and even if it is your primary residence.
March 1, 2008 | Unregistered Commenterkris

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