Posted by: AdminS
Each episode of ‘Hot Property’ stars one of Canada’s top mortgage brokers from Canada’s Premier Mortgage Brokerage – MonsterMortgage.ca. This week’s ‘Hot Topic’ is on Flip Financing and what you need to know before considering the purchase of a property and trying to ‘flip’ it for a profit at later date.
‘Flips’ are considered speculative and most lenders frown upon financing this type of housing purchase.
When considering renovating and flipping a property, carefully read and have your mortgage advisor confirm that your standard mortgage charge does not state that you should not do anything that can adversely affect the home value. If your mortgage agreement dictates that you, the borrower, can’t make changes that could change the property value and the lender finds out you are doing major renovations, they can call your loan.
Buying and flipping a new home, understand all your costs. Remember you must close your new home purchase. So in many cases when you look at the price of a new home or condo you think “wait, I can sell that for more”, but remember that closing and carrying costs can add up fairly quickly. What seems like an easy profit of $40 or $50K if you buy today for $450K and sell in a year for $500K can diminish quickly when you add up, financing costs, closing costs, real estate fees, moving costs, condo/maintenance fees, etc.
Flipping a property and making a profit is exciting but it has a lot of hidden pitfalls. Understanding them will help you make better decisions and ultimately you can make a better return on your investment. To help you, remember the following:
• Seek good advice from a knowledgeable mortgage agent, realtor and accountant (there are tax implications)
• Make sure you have enough cash on hand to carry your property
• Be prepared to break even
• Understand the local real estate market, as home prices start to stabilize profit margins will get tighter.
If you would like to watch previous Hot Property episodes, you can catch previous Hot Property episodes on the CP24 site here. If you have any questions regarding Cash Back mortgages or any other Canadian mortgages, call MonsterMortgage.ca or fill out a contact request here