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
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41 years of Experience Selling Real Estate with honesty, integrity and compassion

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