IS BUYING AND SELLING HOME WORTH IT? HOW DOES THE MATH WORK?
The ideal scenario is not always like you see on TV. There are many factors to take into consideration. When you purchase a home to re-sell or as many call "Flipping a Home" to earn a nice profit, maybe a minimum of $100,000.00 – You have to do the Math. Sounds good but in reality – what is your true return ie. profit ?
We are not talking out of it, or discouraging. The Linda Pinizzotto Real Estate Group is providing the "true facts".
|
Purchase Price |
Original Value Before Doing Anything | $500,000 |
|---|---|---|
| Plus | Commissions when you Sell | $25,000 |
| HST 13% | HST - Commissions when you Sell | $3,250 |
| Plus | Legal Fees (not including disbursements) | $1,800 |
| Plus | Land Transfer – Toronto Municipal Tax Land Transfer – Provincial Tax |
$5,725 $6,475 |
| Total Cost | Without renovations | $545,475 |
|
Purchase Price |
|---|
| Plus |
| HST 13% |
| Plus |
| Plus |
| Total Cost |
| Original Value Before Doing Anything |
|---|
| Commissions when you Sell |
| HST - Commissions when you Sell |
| Legal Fees (not including disbursements) |
| Land Transfer – Toronto Municipal Tax Land Transfer – Provincial Tax |
| Without renovations |
| $500,000 |
|---|
| $25,000 |
| $3,250 |
| $1,800 |
| $5,725 $6,475 |
| $545,475 |
Total Cost Without renovations (if bought other than Toronto $539,750). This is an estimated the minimum commissions just to view the overall Total Cost before renovations, carrying costs and costs relating to the final sale price afterwards.
If the property purchase is in Toronto has a Municipal and a Provincial Land Transfer Tax. If the property purchase is anywhere in Ontario except Toronto, there is only a Provincial Land Transfer Tax.
The above Example — Purchase (other than Toronto) cost is: $6,475.00 These estimates below are based on a 3 and 6 month period to purchase, renovate, resell and close your real estate transaction. The real estate market general states 2 months to list and 2 months to close. A 6 month period of time is realistic. Keep in mind the time of year, (ie winter months, utility costs are more expensive)
| 3 Mth Carrying Costs | Mortgages, Taxes, Utilities and Insurance | |
|---|---|---|
| Plus | 3 mths Mortgage @ 2,500 p/month | $7,500 |
| Plus | 3 mths Taxes @ 500 p/month | $1,500 |
| Plus | 3 mths Utilities & Insurance approx | $900 |
| Total Cost | $9,900 | |
| 3 Mth Carrying Costs |
|---|
| Plus |
| Plus |
| Plus |
| Total Cost |
| Mortgages, Taxes, Utilities and Insurance |
|---|
| 6 Mths Carrying Costs | Mortgages, Taxes, Utilities and Insurance | |
|---|---|---|
| Plus | 6 mths Mortgage @ 2,500 p/month | $15,000 |
| Plus | 6 mths Taxes @ 500 p/month | $3,000 |
| Plus | 6 mths Utilities & Insurance approx | $1,800 |
| Total Costs | $19,800 | |
| 6 Mths Carrying Costs |
|---|
| Plus |
| Plus |
| Plus |
| Total Costs |
| Mortgages, Taxes, Utilities and Insurance | |
|---|---|
| 6 mths Mortgage @ 2,500 p/month | |
| 6 mths Taxes @ 500 p/month | |
| 6 mths Utilities & Insurance approx | |
| $19,800 | |
| $15,000 | |
| $3,000 | |
| $1,800 | |
| Renovations | What is the Value of Renovations | |
|---|---|---|
| Plus | Very Minor Renovations | $8000 -$20,000 |
| Plus | Medium Renovations | $20,000- $50,000 |
| Plus | Larger Renovation | $50,000 - $75,000 |
| Plus | Extensive Renovation is over $75,000 plus | |
| Renovations |
|---|
| Plus |
| Plus |
| Plus |
| Plus |
| What is the Value of Renovations |
|---|
|
Total Breakdown |
3 Mth Purchase-Reno-Sale |
6 Mth Purchase-Reno-Sale-Close |
|---|---|---|
| $25,000 Renovation | Sale $570,000 breaks even | Sale $580,000 breaks even |
| $50,000 Renovation | Sale $595,000 breaks even | Sale $605,000 breaks even |
| $80,000 Renovation | Sale $620,000 breaks even | Sale $630,000 breaks even |
These scenarios show a $500,000 purchase must sell for a minimum $570,000 to break out even.
There are many factors to determine how much you can make if you decided to buy real estate to flip.
Note: “Capital Gains and Exemptions”.
Flip Homes are subject to Capital Gains, you may say good bye to a percentage of your profits.
Provincial of Ontario – Capital Gains Information
LINDA PINIZZOTTO Realtor Linda Pinizzotto Real Estate Group
LINDA PINIZZOTTO REAL ESTATE GROUP
Branch with RE/MAX Realty Enterprises Inc
We welcome you to visit our boutique real estate office.
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