Think carefully before trying to flip
Things to consider if you are purchasing your new home to “flip”
By Andrei Zaretski - New Dream Homes and Condos Magazine
Buying Toronto real estate for the purpose of flipping it for profit may not be as good an idea as it seems, according to Amit Paul.
“I don’t recommend it because there are a lot better ways to earn money in real estate in this city,” Paul said.
He explained that prior to 2002, people interested in buying simply for the purpose of resale were free to assign the agreement of purchase and sale. Buyers had the option of selling off their homes before the closing date once the property appreciated in value. However, some builders no longer allow this.
“Because of that, you actually have to go through the process of getting the mortgage on your name and then actually closing, going through all those costs, and then reselling it and going through all those costs again,” Paul said.
Under certain circumstances, buying for resale can be profitable. A good example is the Town of Milton.
According to Paul, people who bought in Milton 2.5 years ago and sold off their property last year made around $30,000 in a span of approximately 18 months. However, location and timing is the key, so the house must be purchased in the right area just before the “boom” hits – a rather difficult task.
“Doing it in places like Richmond Hill, Vaughan, Markham, Oakville – forget about it,” he said. “It’s not going to work.”
The number of people who are successful in “flipping” homes in the GTA is very low. People who work in the housing business tend to be more successful because of their ability to purchase a rundown home and exercise their contacts to restore it for resale. According to Paul, their profit ranges between $30,000 to $40,000.
Aside from location, square footage is another important factor to consider when buying for resale.
The Multiple Listing Service breaks up its listings into categories of 1,500 to 1,999 square feet or 2000 to 2499 square feet. If you are buying a 1,980-square-foot home, Paul recommends spending the extra few thousand dollars to push over the 2,000 mark.
“If it’s just a matter of a few thousand dollars more, it’s better to (spend it) so that you can get the upper echelon,” he said.
Paying attention to trends comes handy if you plan to sell in a short time. Dark hardwood, dark cabinetry and stainless steel appliances will elevate the price of your home in today’s market.
Things like extra bedrooms could also prove to be a worthwhile investment, since a family in need of a home with many bedrooms will be prepared to spend more money. That’s not to say that you should buy four bedrooms if all you need is three, but you will get your money back, Paul said.
“Generally, the person you want to speak to on things like that is a real estate agent,” Paul suggested. “They’re the ones who are going to know the trends. They’re going to know what people are looking for when they’re buying new homes. They have a good idea of renovation costs and what to look for.”
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