Flip Real Estate for Profit
Published on 29 August 2022, 07:22:56 AM
Plan to flip real estate for profit?
Time is of the essence in today’s real estate markets. But don’t be tempted to skip over the details and go straight for the sale if you flip real estate for a living.
Read these tips on real estate flipping first.
Quick Read
Is flipping still profitable (can flipping make you rich)?
How long does it take to flip a house?
When not to accept over appraised value
Why listing high can be a mistake
Those pesky deadlines and why they matter
What does God have to do with it?
What to put in your offer to purchase
Who gets the deposit if the deal falls through
Is Flipping Still Profitable?
Real estate flipping can make you rich, or be a bust. It’s not for every buyer. To be successful at real estate flipping, you have to:
- be dispassionate about what you buy
- find locations in high demand
- match expenses to potential profits
- not over-renovate for the local market
- get a reliable contractor
- apply for permits before you start.
A FYI you’ll owe federal income tax on any profits, and if you build a home, you could lose out on the GST/HST New Residential Rental Property Rebate. Federal taxes for real estate flipping. Think you qualify for the rebate? See what courts say about the rebate.
Watch Taxes on Flipping Houses in Ontario.
Average Time to Flip Real Estate
How long it takes to flip a house depends on your location, interest rates, competing homes on the market, and your pricing strategy. Plan on six to 12 months to buy, renovate, market, and sell a house (if building permits are easy to get). Otherwise, permit delays, electrical or plumbing upgrades, or foundation issues can set your flip back by months.
Traps to Avoid When You Flip Real Estate
To maximize your returns, avoid these 4 real estate flipping traps.
#1 Accepting Over Appraised Value
Accepting the highest or any offer can compromise your ability to make a profit when you flip real estate.
Multiple bidding wars in Toronto can inspire anxious buyers to offer more than their bank or credit union will finance. Short closing dates can force buyers with shaky credit scores to back away too, knowing financing is unlikely.
Offers way over appraised value could leave you waiting weeks to close a deal that may never happen. Find committed buyers who can afford to pay for hot properties by insisting on cash for the difference between appraised value and the highest, best offer. Best cities for house flipping for millennials. Hint: Durham Region, the Lakelands, Muskoka, Ottawa, London, and Sudbury are almost always popular.
#2 Setting the Selling Price Too High
Unrealistic expectations about how much your home is worth can cause grief and disappointment. You want to flip real estate quickly by reducing the selling price to fit what the market will bear. Start by getting an approximate idea of your home’s value. A competent realtor or professional property appraiser can give you an estimate based on comparable properties in your region.
#3 Missing Contract Deadlines
Offers and counter offers can be withdrawn if you miss the time limit, or before you formally provide a signed, witnessed acceptance. Even though offers may seem irrevocable, no deposit and no acceptance mean no legal contract exists. Avoid the expense and inconvenience of having to relist your property by closing offers to flip real estate promptly.
#4 Cancelled by an Act of God
Acts of God or other mishaps that make it impossible to flip real estate, through no fault of yours or the buyer’s, can terminate an agreement of purchase and sale. Wildfires, floods, sinkholes, or extreme wind can make an investment property uninhabitable and worth far less than the buyer offered. Short of an insurance payout to repair the damage, your buyer can walk without forfeiting their deposit.
Writing Agreements of Purchase and Sale
The APS is critical to quick property flips. Accepting a written offer on time makes it binding on you and the buyer. Once signed and witnessed, offers can only be cancelled by both you and the buyer agreeing to withdraw. Claim capital gains if you declare a home a principal residence.
What to Put in the APS
Pre-acceptance, you can change any standard agreement of purchase and sale in Ontario by writing in or amending and initialling terms or conditions you would like to see:
- the deposit amount
- how long an offer to flip real estate is open (hours to days)
- a home inspection clause in the purchase agreement
- mortgage financing
- assuming a mortgage
- or accepting a property ‘as is, where is’.
List Fixtures and Chattels
Changed your mind about leaving fixtures and chattels behind? After the fact, itemize anything you plan to remove by making an amendment to the agreement of purchase and sale.
Generally, fixtures like cabinets, water heaters or lights stay with the property, unless specifically excluded in the APS. State if you will include or take chattels or moveable objects like a garden shed, appliances, blinds, or furniture.
Exclude treasures you want to keep, like antique doors or an interior stained glass window, by making that clear in the APS or amendment. Watch Chattels vs Fixtures on YouTube.
Include Dates and Times
New to real estate flipping? Don’t forget to specify the closing time (usually 15 to 30 days) and vacant possession date that the buyer becomes the legal owner.
Axess Law can advise you on any other real estate clauses to include in a purchase and sale agreement for Ontario properties. Your property is unique. We review every detail to ensure you are properly covered for potential legal issues.
Fixing Property Defects
A home inspection clause can turn up patent or visible defects the buyer hopes to have repaired or more serious latent (hidden from view) defects that can lead to requests to withdraw a sale or reduce the price when you flip real estate.
Unless the buyer objects before the sale closes, their options are limited unless you deliberately withheld information about a latent defect. For example, failing to be honest on the seller property information sheet (SPIS) can be grounds for a court challenge.
Axess Law advises you if a buyer’s lawyer indicates the deal could be affected.
Keeping the Deposit
Buyers are formally bound once you accept their offer or counter offer. You can keep the deposit if the buyer backs out and even sue for damages. The cost of putting off a move, or getting bridge financing to carry mortgages if you flip real estate for a living, can all be part of a legal claim.
Typically though, most sellers return the deposit to prevent legal entanglements. But if you’re determined to press your case, you can ask the court to enforce specific performance of your legally valid purchase contract.
That could result in a settlement for the price the buyer offered or the gap between the offer and what a new buyer paid. And, you could claim holding costs to put an investment property back up for sale and legal expenses.
Why You Need a Real Estate Lawyer
Only a lawyer can close a real estate transaction in Ontario. While you can sell your own home, a lawyer’s services are necessary to complete the deal. Partnering with Axess Law in your flipping business is a wise decision. We have an affordable real estate lawyer wherever you need one.
Axess Law closes real estate transactions on time and for less than you would normally pay, anywhere in Ontario. We’re fast, affordable, and get deals done by virtual video conference, or in person by stopping by our Greater Toronto Area or Ottawa law offices.
We go over your agreement of purchase and sale to ensure offers you receive are fair. Our licensed real estate lawyers point out oversights and find problems that could delay or even cause a deal to fail.
We go over your agreement of purchase and sale to ensure offers you receive are fair. Our licensed real estate lawyers point out oversights and find problems that could delay or even cause a deal to fail.
Your Axess Law real estate lawyer ensures properties are free of construction or financial liens that could stop sales. Our lawyers communicate with your lender to discharge mortgages or finalize refinancing. They work with buyer’s lawyers to:
- confirm property surveys are correct
- amend the APS when conditions are satisfied
- confirm the title and utilities are transferred
- pay outstanding property taxes
- answer zoning or easement queries
- and decide how or if to remedy property defects or repairs the buyer raises.
On possession day, we ensure the buyer’s lawyer has the keys to your property and it changes hands on time. Transfer title to your new home. And, if you refinance your home to buy or sell investment properties, Axess Law can liaise with your bank or credit union to complete the legal paperwork.
Affordable Real Estate Lawyers, Anywhere You Are
Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
When to hire a real estate lawyer (Ontario).
Remote or In Person Appointments Available
Axess Law virtual lawyers make remote video conference calls anywhere in Ontario, or can meet you in person at any of our conveniently located Greater Toronto Area or Ottawa law offices. Dial our 647-479-0118 lawyer line (toll free to 1-877-402-4207) to make appointments 7 days a week, or book online with our easy web form.
Axess Law has day or evening appointments, onsite parking, and easy transit access.
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