Flipping houses in Canada is a little bit more tricky than flipping houses in the USA, but it is still an extremely lucrative business and the fastest way to make six figures as a full time real estate investor.
How To Flip Real Estate in Canada
The key to flipping houses in Canada is to buy low and sell high.
To buy low in Canada, we need to locate motivated sellers.
Motivated sellers are people who have problems and usually fit into one of the following 3 categories:
The 3 D’s
- Death – Estate sales, probate, widows, widowers, inherited unwanted homes, people who die suddenly become extremely motivated to sell and typically sell wholesale or privately without a realtor.
- Divorce – High emotions equal low intelligence. When people are getting divorced, they are not interested in getting maximum equity out of their home and instead usually fire sale their property just to “get out” and move on.
- Downsizing – People who lose their jobs become extremely motivated and will often sell for less just to avoid foreclosure and bad credit. Intercepting a pre-foreclosure before it goes through the foreclosure process is the best way to capture equity.
Once you have located a motivated seller you can now make a bid to buy wholesale.
What is wholesale real estate? Very simply, wholesale real estate is typically bought at an additional 5-15% discount because there is no “retailer” or realtor involved. As soon as realtors become involved and a property hits the MLS, all wholesale opportunities for equity typically vanish.
How To Make Money Flipping Real Estate in Canada
To make money flipping houses in Canada you want to follow this formula:
Purchase at 40-60% of ARV (After Repair Value, what the home is worth after repairs)
Fix to 70% of ARV
Sell at 100% of ARV
Cost to sell is 10% of ARV
Profit is 20% of ARV
You keep 10-15% of ARV depending on financing
If you take an average home in a value city like Winnipeg, the average home is $320,000 so that will be our ARV
To use real numbers in an example:
$160,000 purchase price, this would be a distressed property (50 cents on the dollar)
Purchase of $160,000 plus $64,000 for renovations gives us a hard cost of $224,000 (70 cents on the dollar)
Cost to sell including realtors (4%), discounts and staging (3%), and transactional costs for 6 months including lawyers, taxes, insurance, utilities etc. (3%) is roughly #32,000
Gross Profit is $64,000
Then we have to pay financing.
If you split the profit with a money partner, you will pay $32,000 which is roughly 14.2% for six months which is 28.4% annually (extremely expensive money)
If you pay 10% annually for money which is a fair price to pay, for six months your financing cost will be $11,200 leaving you with a profit of $52,800 or 16.5% of the sale price – a very healthy profit.
The key to success in flipping houses in Canada is to buy right.
You need to buy the right kind of houses for the right price and keep your renovation costs on time and on budget.
How Long Does It Take To Flip A House in Canada
If you do everything right you should be able to flip most houses in a 6-9 month time frame.
A perfect deal should take 17 weeks:
8 weeks for renovations
4 weeks for marketing
4 weeks to sell
1 week of flex
17 weeks total which makes the whole deal take roughly 4 months.
Flipping houses has made many people full time real estate investors and even certain people rich.
The way to build wealth in real estate is the monopoly formula: 4 green houses 1 red hotel:
Flip 4 houses, make $30,000 a house, then you will have $120,000 cash that can be invested into a large property for cash flow like a multi unit apartment block, a business or a commercial deal.
Follow the formula and reach financial freedom. Get my proven playbook to do it yourself WITHOUT using your own funds here.
Respect The Grind,
Stefan Aarnio
