Are you looking to flip a house? Here are two types of flips you need to know about.
You're thinking of flipping a house. There are two types of flips. A short and a long flip. Short flips are typically done between six months and two years. Building a house takes upwards of two years, whereas a gut job might take up to six months. An important factor to consider in short flips is taxation’s. Revenue Canada considers short flips as active business income. Which means that all of your profit from the proceeds of the sale will be added to your taxable income.
The second type is long flip. In this case, everything would be the same as a short flip, with the only difference as holding on to the property for a few years by renting it out. The difference here is again from a taxation perspective. Because you're holding onto the property for a longer period of time, the proceeds of the sale would be considered capital gains, which is taxed on a much lower rate compared to active business income.
Disclaimer: Please consult with an accountant who can give you professional tax advice.
If you're thinking of flipping a house, please reach out. I'd be happy to share with you my personal experience and my flip calculator that I developed for my flip clients.
Until next time, happy flipping.