About Flipping Houses in Canada

Although the Canadian dollar is becoming increasingly comparable in value to the American dollar, the exchange rate, along with the thriving Canadian real estate market has caused many Americans to start thinking about investing in, and flipping Canadian houses. Though the real estate may be in another country, many of the steps to flipping a house in Canada are quite similar to flipping a home in the United States.

Process and Restrictions

Since you are buying real estate outside of your country of citizenship it is important to first research the rules and regulations as to what province you are buying real estate in. Though most areas will welcome investors from other countries, there are some rules in place that need to be followed. The first hurdle with flipping homes in Canada is citizenship. If you plan to reside in the home you are flipping in Canada, you will need to do so in less than six months. After six months you are required to apply for citizenship. Anything less than six months and you are considered a non-resident. Depending on which province you decide to buy real estate in you may also be limited in how much acreage you can buy. Others provinces may also limit how much shoreline you may purchase. In some provinces you are not allowed to buy farmland unless you plan to move there permanently within two years. It is important to research the real estate rules in place in your prospective province before putting in an offer.

Financing

Before you start shopping for Canadian home to flip, you should secure financing. As a non-resident of Canada, you are still free to apply for bank accounts as well as mortgages and may be able to secure a mortgage from the country itself. American banks cannot register a mortgage in Canada, so you must apply for a mortgage through a Canadian mortgage broker. To apply for a Canadian mortgage you will normally be interviewed by phone and asked to fax copies of assets, liabilities and employment/income history. Upon acceptance you may start looking at properties with a figure in mind. Remember to include flipping costs in your final budget. There is always the option to pay cash in full for properties if you are unable to qualify for a mortgage, and have the financial means to do so.

Buying

Once your financing has been approved, you may start looking for real estate. As with any country, when looking for real estate in Canada to flip, the first thing in your mind should be location. The location of a piece of property can make or break a sale, regardless of the quality of the flip. Research what draws people to the community you are planning to buy the real estate in and use that to gauge where to buy your home. Once you have located a property put in an offer. Keep in mind that in Canada the mortgage ratio is usually 35 percent down payment and 65 percent mortgage covered. Have the house thoroughly inspected before buying. Look for any major problems such as electrical, plumbing, foundation or roofing issues that could take a bit out of your flipping profits. Once the house has passed to your satisfaction, put in an offer and wait for acceptance.

Remodeling

Once the offer has been accepted you will want to start the remodeling process. Regardless of whether you choose to do the flip yourself, or hire a contractor, keep in mind that you are only allowed to be in Canada for six months out of the year without applying for citizenship. If you feel that you cannot flip the house within that time period on your own, you will want to hire a contractor who can work for you while you are not in the country. Just like in any other country, bathrooms, kitchens and curb appeal will give you the most back on your investment. Be sure to budget as much of your money to those areas as possible, while still upgrading the rest of the house to match your investment in those areas. Remember to keep in mind the style of your buyer, not your personal style. Research what styles are selling homes in your area and use them as guiding principles for your renovations. Your real estate agent will be a priceless resource in this area.

Selling

Once the remodeling has finished, it's time to list the home and sell it. If you are close to the six month deadline, keep in mind that you do not necessarily have to be there to sell the home. Find a good real estate agent who can list the home for you while you are back in your home country. You will be required to pay the appropriate Canadian taxes on any capital gained from the sale. This means that the Canadian tax rate will be applied to 50 percent of the gain on your sale. Understand that 25 percent of this is required to be held by a real estate lawyer based off of an estimated gain before you put the house on the market. This amount will be held until the house is sold, or at the time you choose to pull the house off the market. If the profit from the sale exceeds the amount held, a bill will be sent to you for the rest of what is owed. If the profit of the sale is less than what was held, a refund will be given. After the sale has been completed, you are required to file a Canadian income tax form before the end of the year. Other fees and rules may apply dependent on where you choose flip your house. Please visit the link provided in the additional resources section of this article for additional information flipping a house in Canada.

Resources

• Additional information about flipping houses in Canada