Flipping real estate in Canada has become a super trendy topic.
When I tell people that I am a real estate investor, most of them immediately ask me if I flip houses.
With the popularity of tv shows that glamorize the flipping trend, no wonder people think it is the coolest and quickest way to make money in real estate!
Now don’t get me wrong, I love flipping. Infact, that is exactly how I got started in real estate.
But I definitely think that there are some very important tips for flipping real estate in Canada that are vital to one’s success.
My very FIRST experience flipping real estate in Canada
I had just finished university and after reading tons of literature and watching one too many ‘flip that house’ episodes, I decided it was time to take ACTION!
After looking for about two months, I found a Power of Sale (foreclosure) which needed a significant amount of work.
Unfortunately regardless of my how many books I had read, I had no real world experience. I also didn’t have a mentor sharing any tips for flipping real estate in Canada!
Oh…….and of course I wasn’t hosting a reality TV show and I definitely didn’t have a limitless budget.
What happened next?
I had no understanding of the market and what a ‘comparable’ meant – I put way too much work into the house and priced myself out of the market.
As you can imagine, things didn’t go quite as planned (the market was cooling off as well) and I ended up losing about $7000 from my first flip.
I also worked with the wrong Realtor and Overpriced Contractors.
I did gain a lot of priceless lessons which is the best way of looking at it.
Since then I have gone on to do numerous successful flips – but this first experience allowed me to gain and continue to share invaluable tips for flipping real estate in Canada.
5 tips for flipping real estate in Canada
1) Be creative: Try to remember that ‘flipping’ isn’t always about just adding new floors and shiny new granites.
Think about what your customer wants – the ideal home owner in your neighbourhood and over deliver!
One of my flipping strategies has been to create basement apartments in existing homes.
I am able to purchase a bungalow or single family detached home in a nice neighbourhood and add in a LEGAL basement apartment.
Now think about many of the young families who are looking to enter into the market.
Do you think they would pay premium for a property that has an income generating suite?
Of course they would! You can also flip this property to another investor as the income potential in this property is now significantly higher with two rents coming in!
Check out these photos of a basement addition I did on a property east of Toronto. It is quite a transformation!
2) Try to stay away from big ticket items: When I look for my ‘ideal’ home, I look for something that has all the good bare bones.
Experience teaches me that major items like mould, plumbing issues and major roof leaks can wipe out my budget.
I like to focus on cosmetic renovations, by finding homes that have a sound structure and framework!
3) Treat it like a business: The world of real estate IS a business. But beware that sometimes we can get carried away and get emotional.
You have to remember that this is not your home!
Don’t get bogged down with emotional attachment – remember that first and foremost the dollars and cents have to add up.
There has been a crackdown on flipping real estate in Canada!
What does this mean?
It means that you have to keep solid accounts, save every receipt and make sure that your books are in great order once the project is complete.
This will also help keep your budget on track.
It is so EASY to go over budget. Even with a 20% contingency budget (which is what I always give myself) – sometimes the money can just go flying out the door.
4) Understand the market: One of the mistakes I made with my very first flip was over improving for the area?
What does that mean……..well, ultimately the home you renovate cannot be leaps and bounds higher in price than the neighbours home.
Remember that important thing called a comparable!
Make sure the realtor you work with is well versed in this and helps you to understand the future value of your home before you even begin to make improvements.
This is such an important piece. Without it – you can end up losing large amounts of money even when you have a fantastic product!
5) Work with reliable contractors: I know this seems like a ‘no brainer!’ but it really isn’t!
When I first started doing renovations, I had a contractor disappear on me with a $12,000 deposit.
And guess what, I never recovered my money.
The key is to trust but VERIFY!
There are some important key tips here which include:
-Creating a detailed scope of work
-Trying to find contractors with solid referrals
-Releasing money in small chunks *verify each item on your scope
-Trying to source materials on your own
Of course there are things that will naturally come once you have more experience. But if you are just starting out, I hope that my tips for real estate investing in Canada have been useful.
And remember that done correctly, flipping can be a very financially rewarding!