I remember when a good friend told me he was going to start flipping houses for profit in Canada.
I laughed … really hard.
Flashback of our own experiences started flashing in front of me.
You see, Nick, flipped his first home when he was 21 years old.
He spent months on this little 2-bedroom property in Mississauga near Cawthra Road and Lakeshore Road behind Cawthra Park High School.
If memory serves me properly, this property needed basement foundation repairs, a full kitchen renovation, a new basement interior, two new bathrooms, new floors and landscaping.
He worked on this thing day and night and finally sold the property … and he did make a profit.
The cheque from the lawyer on closing was for approximately $31,000.
Not bad right? Especially for a 21-year old on his first adventure of flipping property for profit in Canada.
Here’s the reality of it…
After he paid for all his expenses he was left with about $3,000 in net profit! Not bad for flipping houses eh? :-)
We figured that if he had just went to work at McDonald’s during those months he likely would have made more money!
But he did learn a bunch of lessons, some of which included:
1. Never buy a 2-bedroom house, they’re too difficult to sell even if you add a 3rd bedroom in the basement.
2. Always expect the unexpected. He had to invest a lot more in basement renovations than he planned for because the first contractor he hired completely misquoted the job.
3. You’ll always work harder and stress out more than you initially thought.
The good news was that both of us learned a ton through this process.
And we’ve both gone on to do other flips and invest in other properties.
The lessons from this experience have ended up being worth much more than that $3,000 in profit.
It taught us what to buy, when to buy, how to best sell, how to deal with Realtors, what upgrades are important and which aren’t necessary.
It was a very valuable learning experience.
First, you need to have a contractor you can trust and regardless of their experience and track record you’ll ultimately need to be the project manager if you want things to work on your timelines.
Second, you always want access to money. A good friend of ours did a multi-million dollar flip recently and the construction loan wasn’t enough to complete the job but he had access to “private money” where he could borrow what he needed really quickly. Make sure you have access to more money than you need or you can easily become the “motivated seller” you were initially looking for.
Third, to sell for the maximum amount in the least amount of time you want to understand “market absorption metrics”. These are data points that Realtors have access to that will allow you to examine the state of the market and make predictions on where prices are headed.
Understanding market absorption metrics has been critical to our own success and we hold classes in our offices teaching clients how to do this. It’s like having the ability to peak into the future.
Next, we’ve found that people pay more money for a property when you sell a “lifestyle” instead of 3-bedrooms and 2-full bathrooms.
For example, adding in a “steam option” to the shower is a huge plus. Creating a “fitness centre” instead of a typical “gym” in the home is a huge plus. This may mean connecting a bathroom with a steam room to the gym and having a dry sauna as well.
Or it may mean creating a killer media centre in the basement for movies and entertaining.
A friend of ours always includes a multi-level theatre in his houses … even if it’s a small townhome … and will stick a little snack bar with a popcorn machine at the back.
The reaction from buyers is always positive.
So when flipping houses for profit in Canada keeping “lifestyle design” in mind has been very valuable to us.
Lastly, you want to buy your property in a neighbourhood that can support higher prices. Too many people buy properties and renovate them in areas that will have difficulty in supporting the premium price they’re trying to sell at.
It’s a critical mistake.
So although flipping houses for profit in Canada isn’t easy, it’s definitely possible.