Buying and flipping a house always looks so easy on television.
However, those are reality shows put together by professionals who have been doing this for years. If your favourite HGTV stars have inspired you to flip a house for profit, take a deep breath and do your research first.
House flipping can be a great source of revenue, especially if you enjoy home renovations and construction. However, it can also be a financial risk. If you choose to get into the business, there are some things you will need to know.
How to Find Houses to Flip
There are certain things you should look for when you are buying a house to flip. Firstly, you should not pay over market value for a home. You need to look for fixer uppers that are priced to sell quickly or listed at discounted prices. There needs to be enough room between your purchase price and your selling price to turn a profit.
If you are looking for the perfect fixer upper to flip, work with a realtor who will help you get the best price for a property. They know the market and know which homes are affordably priced.
Turning a Profit
Flipping houses for profit requires research and financial planning. There are many elements that should be considered when determining your budget. For example, mortgage rates can be different for investment properties than they are for primary residences, and often you will need to make a higher down payment.
It’s also important to keep in mind the fact that you will likely go over budget with your renovation cost. When working on a home, there are plenty of hidden issues that could come up, and more often than not, they will undoubtedly happen. You should always make sure there is extra room in your budget for unforeseen circumstances.
Tax Considerations For Flipping a House
While you can potentially earn a great profit, flipping a house has tax requirements you need to follow by law. You need to report all profits you make on your real estate transactions to the CRA. Profits made from flipping houses are considered taxable income.
According to the CRA, flipping a home consists of buying and selling a home that is not your principal residence within a short period of time. As long as you follow the right legal guidelines and claim your income honestly on your taxes, flipping a house is a perfectly acceptable way to earn a profit.
Be Cautious With DIY Renovations
Learn as much as you can about DIY renovations before you try to take everything on by yourself. While doing something on your own can save you from hiring someone, it can end up costing you more money in the long run if you do it wrong and end up having to hire someone to fix it.
The Bottom Line
Work with a professional. Realtors know this industry inside and out. In fact, many of our own Barry Team members have firsthand experience flipping homes for profit, or helping their clients purchase homes to flip. They will advise you on the local market, properties that are available, and they can even recommend the best financial advisors or contractors to help you along the way. All you have to do is contact us to ask for help!