Hey, Canadian fix-and-flippers! We know you’re wondering whether real estate flipping is worth the time and energy. The answer to that question is: yes, it sure can be profitable if you go about it in the right way.
But there are a lot of things to consider before investing your time and money into this new side hustle. Read on for everything you need to know about property flipping.
Canada’s Hot Real Estate Market
While the market has cooled off a bit since its peak in February, real estate remains hot in Canada. The average house price in Canada is $856,900 according to CTV News data from April 2022—up 25% from 2021. And despite a 12% drop from last year’s peak sales volume, flippers can expect profits of around $25k per sale if the market continues to rise as expected.
The Case for Investing in Real Estate as a Side Hustle
If you’re looking for a side hustle that can help you build wealth, real estate investing is right up your alley. Real estate investments are long-term and passive, but they also require some time and effort to make them profitable.
Real estate offers several benefits that other asset classes don’t, including:
- Building wealth over time through capital appreciation and equity gains
- Passive income from rent payments or even property management fees
- Diversification of your portfolio with a more stable asset class
Because of the rise in living expenses, almost 60% of Canadians have already taken up a side hustle. Consider the benefits of real estate investing and join them.
Should You Flip Houses in Canada?
If you’re considering flipping houses in Canada, you’re in for a whole lot of work and risk. Flipping is a risky business, even when you’re talking about a market that’s as stable and supportive as this one. If your plan is to flip houses for quick profits, it may be better to invest elsewhere.
But if you’re ready for all the hard work that comes with being an entrepreneur who takes risks on real estate deals, then we might have just the business opportunity for you!
To begin with: You should know that flipping houses takes more capital than other types of investments, like buying stocks. There are many costs involved in getting into the auction game. These include renovations, advertising costs, etc.
Budgeting and planning are critical when flipping a house. Your profit is in the details!
The Key to Profitable Flipping Lies in the Location
Location, location, location! It’s the most important factor in real estate. The key here is to avoid making mistakes common among newbies:
- Buying too big or too small
- Buying a property that needs too much work
- Selecting an area that is not growing
If you’re just getting started as a house flipper and want to make sure your first flip is profitable, choose a property that has:
- Ample parking space
- Access to public transportation
- Nearby dining areas, healthcare facilities, schools, etc.
You don’t need to be an expert in all the finer points of real estate to pick a property that buyers would be interested in. Think about everything you’d be looking for in your next home or condo and go from there.
The Best Way to Finance a House Flip Project
Most house flippers finance their projects through a combination of cash and private or hard money loans. You’ll need to put down at least 20% to qualify for most traditional mortgage products, which means you’ll likely have to find other financing options if you don’t have the upfront capital required.
One popular option is using a home equity line of credit (HELOC). A HELOC is a line of credit secured by your property’s value that you can withdraw from as needed. The biggest upside to a HELOC is that it has low-interest rates and allows you to use the money however you want.
What About a Mortgage?
A mortgage is the easiest and most common way to finance your flip project, but it’s not always the best option. If you have good credit and don’t need to borrow over 80% of the cost of your project, a bank will probably give you a good rate.
However, banks are increasingly reluctant to lend money for renovations or flips because they are risky investments. That being said, consider saving or getting a loan from family or friends. Borrowing from personal connections makes sense because these people probably know what kind of real estate opportunities exist in your area and can help steer you towards properties that won’t require extensive repairs.
If you decide to go the bank route, shop around for the best deal and be prepared to answer questions about your credit history, employment situation, and plans for the property. The lender will also order an appraisal to make sure that the value of the property is high enough to justify loaning you money. Sometimes, you may need private mortgage insurance (PMI) if you are putting less than 20% down on the loan.
Flip Your Way to Financial Freedom
We hope we’ve given you some insight into whether flipping houses in Canada is a profitable side hustle for you. We’ll leave you with a parting thought: don’t forget about all the other costs associated with flipping, like taxes, that can eat up your profit margins. Real estate flipping is an excellent way to make money fast and become financially independent—if you know what you’re doing.
If you want to learn even more money-making strategies, join the CashFlow Tribe to access the resources you need to start seeing profits.