Flipping Homes on the Real Estate Market
You have to do the Math * The Ideal situation
Purchase a Home * 3 months “Flipping Real Estate”
Make a minimum of $100,000.00 – Wrong!!
Sounds good but in reality – does it work?
| Purchase Price | Original Value before doing anything | 500,000 |
| Plus | Commissions when you Sell | 25,000 |
| Plus 13% HST | HST on Commissions when you Sell | 3,250 |
| Plus | Legal Fees | 1,800 |
| Plus | Land Transfer Tax – if Toronto – Municipal Tax Land Transfer Tax – Provincial Tax |
5,725 6,475 |
| Total Cost | Without renovations | $545,475 |
Total Cost Without renovations (if bought other than Toronto $539,750)
This is an estimated the minimum commissions just to view the overall Total Cost before renovations, carrying costs and costs relating to the final sale price afterwards.
- If the property purchase is in Toronto has a Municipal and a Provincial Land Transfer Tax
- If the property purchase is anywhere in Ontario except Toronto, there is only a Provincial Land Transfer Tax
- The above Example — Purchase (other than Toronto) cost is: $6,475.00
These estimates below are based on a 3 and 6 month period to purchase, renovate, resell and close your real estate transaction. The real estate market general states 2 months to list and 2 months to close. A 6 month period of time is realistic. Keep in mind the time of year, (ie winter months, utility costs are more expensive)
| 3 Months Carrying Costs | Mortgages, Taxes, Utilities and Insurance | |
| Plus | 3 months Mortgage @ 2,500 per month | $7,500 |
| Plus | 3 months Taxes @ 500 per month | $1,500 |
| Plus | 3 months Utilities & Insurance approx. | $ 900 |
| Total Cost | $9,900 |
| 6 months Carrying Costs | Mortgages, Taxes, Utilities and Insurance | |
| Plus | 6 months Mortgage @ 2,500 per month | $15,000 |
| Plus | 6 months Taxes @ 500 per month | $ 3,000 |
| Plus | 6 months Utilities & Insurance approx. | $ 1,800 |
| Total Cost | $19,800 |
| Renovations | What is the Value of Renovations | |
| Plus | Very Minor Renovations | $8 -$20,000 |
| Plus | Medium Renovations | $20-$50,000 |
| Plus | Larger Renovation | $50- $75,000 |
| Plus | Extensive Renovation is over $75,000 plus |
| Total Cost Breakdown | What is the Sale Price after Renovations | |
| 3 Month Purchase-Reno-Resold-Closing | ||
| $25,000 Renovation | Sale Price of $570,000 breaks even | |
| $50,000 Renovation | Sale Price of $595,000 breaks even | |
| $80,000 Renovation | Sale Price of $620,000 breaks you out even |
| Total Cost Breakdown | What is the Sale Price after Renovations | |
| 6 Month Purchase-Reno-Resold-Closing | ||
| $25,000 Renovation | Sale Price of $580,000 breaks even | |
| $50,000 Renovation | Sale Price of $605,000 breaks even | |
| $80,000 Renovation | Sale Price of $630,000 breaks you out even |
These scenarios show a $500,000 purchase must sell for a minimum $570,000 to break out even. There are many factors to determine how much you can make if you decided to buy real estate to flip. Note: “Capital Gains and Exemptions”. Flip Homes are subject to Capital Gains, you may say good bye to a percentage of your profits.
Provincial of Ontario – Capital Gains Information
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns248-260/254/menu-eng.html