3 Easy Steps to Flip your First House!

House Flipping

House flipping is, essentially, buying a house or property with the intent to sell it for a profit.
This is a great way to build equity in your current home if you are planning on doing renovations
in your primary residence, or in an additional property you’ve purchased purely with the intent of
flipping and not living in. If your family does not mind moving every couple of years and living
in a constant renovation it is a great way to amass large amounts of equity. In a nut shell, a good
flip will follow a basic formula: buy cheap, renovate for a reasonable cost, and sell for a profit.
This may sound easy, but there are many things that could potentially go wrong if not thoroughly
considered and planned ahead of time.

Step One: Research

Do you want to flip an older fixer-upper or a newer home? What location are you thinking
about? Will it be a single family house, or do you want to create multiple units for student
renters? These are the types of questions you will need to ask yourself when considering flipping a
property. You will want to familiarize yourself with the steps involved with purchasing a property,
educate yourself (and with the help of your realtor) about the real estate market in Kingston,
and determine what location best suits your needs and will offer you a potentially greater return
on your investment. Maybe someone has already flipped a house in the neighborhood you’re
considering – how long did it take them to turn the house around and what was their final sale
price? The more information you can gather ahead of time the better prepared you will be.

Step Two: Know your Purchasing Budget, Renovation Budget and Timeline

This brings us to the next point: budgeting. How much can you spend on a property? Do your
research, and be aware of what kinds of improvements you want to do, especially in older
homes where you will have to consider things like structural, plumbing, electrical, insulation,
pest control, and heating and cooling. If you are knowledgeable and know how to do the work
yourself you’ll save money; if not, you’ll have to account for the cost of labour in addition to the
renovation materials. You need to look at places that need more renovations than most people
would want to do themselves, such as: fixing a bad layout, new kitchen and bathrooms, new roof,
or re-wiring.

From your list of renovation ideas, you need to be able to determine the total costs to flip the
property into a beautiful home – offering all the amenities that the Kingston market would be
looking for. Knowing what you can do yourself, and what you will have to hire others to do will
help you determine what’s feasible, and what your final profit will be.

There are a lot of very expensive things that you can do to a house to improve it, but these may
not always be your best option in terms of your final profit. You don’t want to over renovate
and potentially lose your money when you are unable to sell it at a high enough price to make
a decent profit. Personally, I find a good rule is to assess the properties around your area and
make your place just slightly better – thereby keeping it comparable and your final listing price
reasonable for what most people will pay for in the neighbourhood. Creating that better vision of
a better lifestyle is always your best bet.

Step Three: Account for Extra Costs and Extended Deadlines

There are still extra costs to consider on top of your purchase price and renovations, such as
carrying costs, the cost of selling, and any extra surprises you may come across when renovating.
Make sure to set a deadline for all the work to be completed, but keep in mind that things may
come up and that this may be pushed back thereby increasing the necessary time and effort, as
well as costs, needed to complete the job. Assuming you have another full-time job, planning
ahead of time to ensure everything will run as smoothly as possible is crucial for staying on track
and on budget.


Step Four: List it!

Okay, so I'm sneaking in an extra step. Once you've chosen the perfect property, purchased it, and are now finished your renovations, I always suggest listing your property with the same Realtor you worked with to buy the property initially. Ideally, they will have kept in contact with you while you were doing your renovations and have a better understanding of the complete transformation of the house. They will be more knowledgeable of all the work you've done, and will therefore be more capable at encouraging potential buyers and highlighting your hard work.

Make sure you take pictures only when EVERYTHING is completed and each room looks its best. Clean up all tools, get rid of any extra garbage or materials, and show your property as if it was a model home. You want potential buyers to feel like you've done everything already - even leaving light-switch covers off or door handles missing can give a negative impression that there's still more work left to do.


Capital Gains Tax and Flipping Houses

The idea of buying a house for a low price and then selling it at high price has created quite the
trend in the real estate market in the past several years. Some people believe that since a person
is not charged taxes on profit from selling their personal residence then the same rule applies
to house flipping, but in fact, a profit from a house that’s been flipped can be subject to capital
gains tax. There are two tax brackets for this; first, if the investor sells the house in less than a
year, they will be charged as much as 35% in taxes; second, if they sell after a year of owning the
property then they will only have to pay a maximum of 15% in taxes. However, keep in mind I
am not an accountant and you should talk to your own accountant or financial advisor regarding
your particular circumstances. A capital gains tax (CGT) is a tax charged on capital gains, the
profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most
common capital gains are realized from the sale of stocks, bonds, precious metals and property.
Not all countries implement a capital gains tax and most have different rates of taxation for
individuals and corporations.

For equities, an example of a popular and liquid asset, national and state legislation often has a
large array of fiscal obligations that must be respected regarding capital gains. Taxes are charged
by the state over the transactions, dividends and capital gains on the stock market. However, these
fiscal obligations may vary from jurisdiction to jurisdiction because, among other reasons, it
could be assumed that taxation is already incorporated into the stock price through the different
taxes companies pay to the state, or that tax-free stock market operations are useful to boost
economic growth.


Dan DaCosta

Sales Representative
Century 21 | Champ Realty
1642 Bath Road | Kingston ON
 613 453 2735


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Dan DaCosta

Dan DaCosta

CENTURY 21 Champ Realty Ltd., Brokerage*
Contact Me