Property Flipping, the practice of purchasing properties with the intention of selling them quickly for a profit, has gained popularity in the real estate world. While property flipping can be a lucrative venture, it is essential to have a comprehensive understanding of its pros and cons before diving into this dynamic market. In this article, we will explore the advantages and disadvantages of property flipping to help you make informed decisions.
Pros of Property Flipping:
Potential for Profit: One of the primary attractions of property flipping is the potential for substantial profits. Buying distressed or undervalued properties, renovating them, and selling at a higher price can result in significant returns on investment.
Active Income Generation: Property flipping allows you to generate active income by actively engaging in the process of acquiring, renovating, and selling properties. This hands-on approach can provide a sense of control and direct involvement in the profit-making process.
Quick Returns: Unlike long-term real estate investments, property flipping offers the opportunity for relatively quick returns. With effective planning and execution, you can turn around a property in a matter of months and move on to the next project.
Skill Development: Property flipping allows you to develop valuable skills in areas such as property evaluation, negotiation, project management, and understanding market trends. These skills can be transferable and beneficial in future real estate endeavors.
Market Agility: Property flipping enables you to adapt to changing market conditions quickly. By staying informed about market trends and adjusting your strategy accordingly, you can take advantage of emerging opportunities and maximize profits.
Cons of Property Flipping:
Financial Risk: Property flipping involves financial risks, especially if the market experiences downturns or unexpected expenses arise during the renovation process. Fluctuating property values and unforeseen costs can significantly impact profitability.
Market Volatility: Real estate markets can be unpredictable, and property flipping is subject to market fluctuations. Economic factors, interest rates, and local market conditions can impact the demand and sale price of flipped properties.
Time and Effort: Property flipping requires substantial time, effort, and hands-on involvement. From property research and acquisition to managing renovations and overseeing the selling process, flipping properties can be time-consuming and demand significant attention.
Renovation Challenges: Renovating properties can present unforeseen challenges and additional costs. Dealing with contractors, permits, and unexpected issues during the renovation process can be stressful and affect project timelines and profitability.
Limited Cash Flow: Property flipping often requires significant upfront investment capital. This may restrict your ability to diversify your investments or limit your cash flow until a property is sold, potentially affecting your financial flexibility.
Property flipping can be a profitable venture for individuals with the necessary skills, market knowledge, and a strong appetite for risk. While it offers the potential for substantial profits and active income generation, it comes with risks and challenges that should not be overlooked. Understanding the pros and cons of property flipping is crucial for making informed decisions and mitigating potential pitfalls along the way. By conducting thorough research, developing a strategic approach, and managing risks effectively, you can increase your chances of success in the dynamic world of property flipping.
Is property flipping in Canada profitable?
Property flipping in Canada can be profitable, but it is important to note that profitability can vary depending on various factors, including the local real estate market, economic conditions, location, property type, and the investor's knowledge and skills. Here are some key considerations regarding property flipping profitability in Canada:
Market Conditions: Fluctuations in the real estate market can significantly impact the profitability of property flipping. In a hot seller's market with rising property prices and high demand, there may be greater opportunities for quick profits. However, in a slow market or during a downturn, it can be more challenging to find suitable properties and achieve desired profit margins.
Location: Location plays a crucial role in property flipping profitability. Properties in desirable neighborhoods with strong market demand tend to offer better opportunities for higher returns. Factors such as proximity to amenities, transportation, schools, and employment centers can influence property values and buyer interest.
Renovation Costs: Effective cost management and accurate estimation of renovation expenses are vital for maintaining profitability. Renovations that exceed the budget or encounter unexpected issues can erode potential profits. Thoroughly assessing the property's condition and conducting due diligence before purchasing is essential to mitigate renovation cost risks.
Buying at the Right Price: Purchasing properties below market value is key to maximizing profitability. This may involve finding distressed properties, negotiating favorable deals, or identifying undervalued opportunities. Acquiring properties at a lower price can provide room for renovation costs and potential profits when selling.
Selling Strategy: A well-executed selling strategy is crucial to realizing profits in property flipping. Factors such as timing the market, pricing the property competitively, effective marketing, and appealing to target buyers can influence the speed of sale and final sale price.
Financing Costs: The cost of financing, such as mortgage interest rates, can impact overall profitability. Higher financing costs can eat into profits, especially if the property takes longer to sell than anticipated.
Tax Considerations: It's important to consider tax implications when flipping properties in Canada. Profits from property flipping are generally treated as business income and subject to taxation. Understanding tax rules, deductions, and any applicable capital gains taxes is crucial for accurate financial planning.
It is recommended to conduct thorough research, market analysis, and due diligence before venturing into property flipping in Canada.
Note: You not supposed to "literally" flip the property. So avoid buying or selling during tornado season.
Timing is a crucial factor when it comes to property flipping, as it can significantly impact your potential profits. The best times of the year for buying and selling properties when flipping are as follows:
Buying:
a. Off-Season: The winter months, particularly January and February, are generally considered the off-season for real estate. During this time, there tends to be less competition from other buyers, which can lead to more favorable purchase prices.
b. Late Fall: Towards the end of the fall season, around October and November, some sellers may be motivated to close deals before the holidays or colder weather sets in. This can create opportunities for finding discounted properties.
Selling:
a. Spring: The spring season, typically from March to May, is often regarded as the prime time for selling properties. With the arrival of warmer weather, more buyers enter the market, resulting in increased demand. Properties also tend to showcase better with blooming gardens and brighter natural light.
b. Early Fall: September and early October can be a favorable time to sell. Buyers who missed out on properties during the busy spring and summer months may still be actively searching, and the weather remains pleasant in many regions.
It's important to note that the optimal timing for buying and selling properties can vary depending on the local real estate market, regional climate, and specific market conditions.
When flipping a property, it's essential to have a solid plan and follow best practices to maximize your chances of success. Here's a comprehensive list of best practices to consider when flipping a property:
Set a budget: Determine your budget before starting the project. Consider acquisition costs, renovation expenses, holding costs, and contingency funds.
Research the market: Conduct thorough market research to identify areas with high demand and potential for profit. Consider factors such as location, demographics, market trends, and comparable sales.
Develop a timeline: Create a detailed timeline outlining key milestones and deadlines for each phase of the project, including acquisition, renovation, and listing.
Assemble a team: Build a reliable team of professionals, including contractors, architects, real estate agents, and attorneys. Make sure they have experience in flipping properties.
Perform due diligence: Before purchasing a property, conduct a comprehensive inspection to identify any structural, electrical, or plumbing issues. Review local zoning regulations, permits, and potential liens on the property.
Calculate the after-repair value (ARV): Estimate the property's ARV to determine the potential resale price. Analyze comparable sales and consult with real estate professionals to assess the property's value after renovation.
Plan renovations strategically: Create a detailed renovation plan and budget. Focus on improvements that will add value to the property, such as kitchen and bathroom upgrades, landscaping, or increasing living space.
Obtain necessary permits: Ensure that all required permits are obtained before starting any construction or renovation work. Compliance with local building codes is essential.
Stick to the budget: Strictly adhere to the budget to avoid cost overruns. Maintain a record of all expenses and monitor the progress regularly.
Project management: Oversee the project closely and maintain effective communication with your team. Regularly visit the property to monitor progress, address any issues promptly, and ensure quality control.
Consider energy efficiency: Integrate energy-efficient features and appliances into the renovation, such as LED lighting, programmable thermostats, and energy-efficient windows. This can add value and appeal to potential buyers.
Choose durable materials: Select quality materials that are durable, low-maintenance, and aesthetically pleasing. This helps increase the property's value and reduces the need for future repairs.
Focus on curb appeal: Enhance the property's curb appeal by improving landscaping, painting the exterior, and ensuring a well-maintained appearance. First impressions are crucial for attracting potential buyers.
Market strategically: Develop a marketing plan to attract potential buyers. Utilize online platforms, professional photography, virtual tours, and staging techniques to showcase the property's best features.
Price competitively: Set the listing price strategically based on the property's value and market conditions. Avoid overpricing, as it can lead to extended holding periods and decreased profitability.
Negotiate effectively: Develop negotiation skills to secure the best possible price during the buying and selling process. Be prepared to negotiate with buyers, contractors, and suppliers to achieve favorable terms.
Plan for contingencies: Account for unexpected delays, additional expenses, and potential market fluctuations in your budget and timeline. Build contingency funds and include buffer time in your project plan.
Maintain proper documentation: Keep detailed records of all project-related expenses, contracts, permits, and warranties. Proper documentation is essential for legal and financial purposes.
Understand tax implications: Consult with a tax professional to understand the tax implications of property flipping, including capital gains tax, deductions, and any applicable local regulations.
Learn from each project: Reflect on each flipping project to identify areas for improvement. Continuously educate yourself about the real estate market and stay updated on industry trends.
Remember that flipping properties involves risks, so it's crucial to conduct thorough research and make informed decisions. Adhering to these best practices will help increase your chances of a successful property flip.
Today I want to talk about several different things.
#1. Kyle MacDonald, aka the guy who traded a Red Paper Clip until he eventually got a house. See the video below:
Kyle MacDonald became noteworthy years ago for starting with a red paper clip and trading it for a pen, which he traded for bigger and better things until he eventually ended up owning a house in Canada.
In a way this idea of trading things for something bigger and better is a bit like how the stock market works. You trade cash for stocks when they have a lower value, you sell it for a higher value, then you buy different stocks for a lower value which you then sell for a higher value... then maybe you buy gold at a time when gold prices are soaring, then you sell the gold and buy other stocks which are showing growth... and you repeat this process again and again until you have a multiplied the amount of money you started off with many times over.
That is the theory at least. The problem is how do you guarantee the things you invest in go up in value?
#2. Energy Trading, which involves trading electricity with other regions in order to provide electricity to customers at a cheaper rate.
Energy trading can also relate to oil and natural gas, selling it or buying it. So for natural gas, commonly used in residential home heating, it again comes back to the idea of trying to save money and pass those savings unto the customers who are buying the natural gas. With oil it is going to refineries and later made in gasoline, diesel, petrochemicals, and even plastics. So that translates into different prices at the gas pumps and also effecting the petrochemical / plastics industries.
In Ontario, Canada our electricity grid has to produce a surplus of 10% more power constantly in order to prevent brown outs / shortages of electricity. (I learned this during a brief stint of working for an electricity / natural gas distributor in Toronto.)
Ontario then sell that surplus of electricity to New York State, Michigan, Quebec and other neighbouring regions. In the USA they use a similar system of trading electricity between various states, allowing each region to produce surplus electricity, but also to be able to sell their surplus electricity at a discount to neighbouring regions. This way no region suffers brownouts and ultimately the various regions can save money on the cost of electricity.
See the video below in which Gustavo Luna from Bismarck, North Dakota explains how energy trading works.
Energy Trading should not be confused with Commodities Trading - which focuses on buying oil for example at a lower price and selling it for a profit. With Energy Trading, the goal is to buy surplus electricity at a cheaper rate and then pass off those savings to consumers. So you are not making a profit, you are simply saving money for consumers.
Or at least that is my understanding of it. Gustavo Luna would probably be disappointed by my simplistic explanation.
#3. Real Estate Investment / Flipping Properties - which is really my primary topic today. (You are probably wondering what the above two ideas have to do with the third, but don't worry I am getting. I just have to make sure the readers are aware of everything before I get to my idea.)
There are a number of ways people can invest in real estate.
Buy a property for the investment, rent it out for years, sell it later for a profit when the real estate prices in the region skyrocket.
Buy a property, renovate the property in ways that will boost its resale value, then sell it ASAP for a profit. At which point you buy another property, renovate it, and sell it again.
Invest your money with a company that invests in real estate (office buildings, etc) and churns a profit from the rentals and later sales of properties. That company collects their percentage and you get a percentage while they do all the work, but you are the one taking the risk.
Buy mortgage securities on the stock market from banks and sell them later for a profit. The trick to this is that if you are aware of what happened during the Financial Crisis of 2007-08, you could be buying AAA rated mortgage securities that are actually full of junk mortgages (eg. sub prime mortgages). The problem with the mortgage security industry is that they tend to bundle together junk mortgages and give them together an AAA rating, even though it is junk. It is truly a care of buyer beware.
Finance the mortgage of a family member - this is quite good because a family member is pretty much guaranteed to pay you back. You can be lenient with the payment schedule, the interest rate, etc if needed, but otherwise it works out quite well. Even if the family member does somehow default on the home, you foreclose on them, keep the money they already paid you and then sell the home for a profit. That is a Win-Win financially for you if they fail to live up to their side of the mortgage agreement. It creates an incentive for the family member to not burn bridges because they know that if they do, you foreclose on the home and make a tonne of money anyway. (The only way you could potentially lose money in this scenario is if the real estate market collapses.)
So what do these things have to do with each other?
Well, that is where we get into the fun part.
I think there is a future in "real estate trading and investing", wherein people could invest in say "Renovating and Flipping Properties" for example.
Idea #1.
Lets say you have 10 investors who invest $100,000 each in buying and renovating a house. They do none of the work as part of their investment pays for a contractor who renovated the house. Upon completion they then sell the house for 20% more than what they paid for the property, the taxes, the cost of renovations, etc.
Those 10 investors then have $120,000 each, which they could then use to buy and renovate two smaller houses for $600,000 each, which they later sell after the renovations for $720,000 or more each... So each investor then has $144,000 or more.
Now if they managed to do all of this is the space of 1 year, that is a 44% increase from their investment.
A person could do this individually... and even do the renovation work themselves, and hope they follow the building code. But it actually makes more legal sense to have a contractor do it, have it all in writing in a contract, with liability insurance and everything in case anything goes wrong. But that would require the person who is funding this whole thing to come up with all the money by themselves.
In contrast, if people only had to invest one tenth the needed amount, there is more security in numbers as a shared enterprise... and it allows the group to buy larger properties or multiple properties, thus diversifying their investment.
Kyle MacDonald for example when he got the house eventually could have renovated himself - or hired a contractor - and later sold the larger house for a profit. Then he takes the money he made, buys a different house, renovates it, sells for a bigger profit... and keeps repeating. He in theory could have gone down that road, but is probably pretty amazed at what he managed to accomplish with just a red paper clip as is.
Idea #2.
Another way to do this "Read Estate Trading and Investing" idea is to buy up properties that make good rentals (properties that don't need a lot of maintenance costs are ideal), and then rent them out for a profit. Industrial properties are pretty good for this.
So for example 10 people buy a warehouse which they then lease out to a company for storage, which allows them to make a tidy income every month on their investment.
Individual investors could sell their one tenth share to other people if they later wish to do so, take whatever profit from that sale and then invest in a different property the same way.
Idea #3.
10 family members finance the mortgage of an eleventh family member. This way each of the 10 family members only have to pay one tenth of the total cost of the home, which they then gain money back + interest each month until the mortgage is paid off. The benefit of this is that there is even more familial pressure on the 11th family member to pay off the mortgage... and failure to do so means the family forecloses, sells the property and collects their profits.
Oddly enough something similar to this is already done by Mennonites when buying up farmland for their children. The whole community of Mennonites will pitch in, buy a property for a newlywed husband and wife, have a barn raising, renovate the house, and the property is later paid off.
And because Mennonites don't pay taxes they are laughing all the way to the bank. (What you might not know about Mennonites is that because they don't pay taxes, are very industrious and don't spend their money on cars/food/rent/university tuition/etc they end up saving lots of money and ultimately tend to be quite well off financially. They have so little expenses compared to the rest of us and money that goes into the Mennonite community rarely comes back out.)
Idea #4.
Crowdfunding Property Investment
Imagine if 50,000 people each invested $200 each. That is $10,000,000 and they use it to buy up multiple properties which they then:
Renovate.
Rent out.
Sell.
Following the same principle as #1, they could make perhaps a 44% increase in value in a single year by buying, renovating and selling properties in this manner.
Those people could also sell or trade their share(s) to someone else and invest in other properties instead. They could decide whether they want to invest in small properties, large properties, residential, industrial, rental properties, and more.
And they could do all of this via a website which manages it.
Idea #5.
Website? Why not also an app? A real estate investment and trading app.
Move over Bitcoin, you are basically worthless and eventually people are going to realize that Bitcoin is worthless.
Real estate however. There is a reason why it is called "Real Estate". It is tangible property.
So just imagine this revolutionary way of investing in real estate. One part Kyle MacDonald's Red Paper Clip, one part a bit like energy trading or commodity trading as explained by Gustavo Luna - except this is the buying, selling and trading of real estate.
That to me is an interesting and exciting app someone should make.
So yeah.
There is my idea for an app someone should make. I should start a crowdfunding enterprise just to create the app, with the first people who invest getting both a share of the app and a share of the first property that we invest it.
Now you might think, how does one make money off an app like that?
Well, easy. You charge 0.1% fee off every sale transaction. So if someone invests $200 and later sells their share for $300, the app takes 30 cents. So 10 cents off each $100. It isn't a lot really, but if you get 50,000 people to invest in the first year, and they later sell off their shares for $250 or more then you are still looking at 25 cents x 50,000.
$12,500.
If the app grows in popularity and millions of people start investing in real estate this way, that 10 cents per $100 isn't pocket change any more. It is millions.
So what is wrong with this idea?
Well, I am pretty sure there are some laws from the USA that would say that this kind of investing is illegal - because the government also wants their share. The USA would want to tax any transactions and profits happening within the USA.
And it would target any real estate assets being bought, renovated and sold in the USA.
So any kind of investment in the USA through the app would mean American citizens would be taxed on each transaction, and investing in the USA would be problematic. The app would make more sense in countries which allow this sort of investing and aren't so worried about taxing people who want to invest their money this way.
The USA has similar problems with offshore gambling websites. People can buy virtual chips/etc overseas, gamble, possibly win (although most likely they lose it all), and then cash out their chips and never have to pay anything in taxes.
Similarly, the USA has other problems with Bitcoin and other crypto-currencies. They are hard to track and it becomes unclear if people made a profit by buying and selling things using Bitcoin.
So the app and company that runs it would need to be based in the Bahamas, Panama, Ireland or some similar tax haven.
And this is where I hit a brick wall in terms of motivation to make this happen myself. It seems like too much work and I have other issues to deal with, rent, bills to pay and a baby to feed.
So I am not saying "go ahead and steal this idea". Honestly, I feel like this is definitely my idea and I would be upset if someone stole it and made a profit off it. But I would be willing to sell my idea or become an intellectual property rights partner with someone else if they want to do the leg work on this idea.
I currently cannot be bothered to do it all myself.
One more idea...
I would love to buy a farm, buy horses and open an archery range / horse riding school. I think that is a business worth investing in. I have already done the math on what it would require in terms of investment, how much to charge students, how much to pay the riding instructors, and how much money could be made within the first year. It would be one of the very few places in North America where people could do equestrian archery. (Seriously, go try to find such places and you will find they are few and far between.)
One last idea, I swear this is the last one.
Start a charity that deals with buying properties for mustang horse sanctuaries. People donate to buy the property, the property is renovated with fences to keep in the horses, and the mustangs are then transported to the property where they can roam freely. This would solve a problem in the American West where mustangs are a problem due to overpopulation and the government culling them because they get on to the properties of ranchers, ruining crops, etc. The people who donate get a voucher they can use on their income taxes, but really it is mostly about giving the mustangs a safe place where they roam without being killed by ranchers or by the government.
Real estate bargains exist in the marketplace for people with a little expertise and motivation to go after them. These are actual real estate steals in the market place today with low asking prices and enormous upside if a knowledgeable buyer showed up. Unfortunately, if you do not have a grasp or a good education in how to take advantage of real estate bargains, you may be out of luck. Fortunately, nobody said it had to be that way. Everyday, people discover the insider knowledge that pioneers in real estate purchases have found and are willing to share. Real entrepreneurs have helped countless people discover the wealth potential they have with a few easy to learn insights that anybody can pick up. The Internet has only made the process easier, with sites like Dean Graziosi Motor Millions website. You may be looking at the real estate market, and you’re thinking, yeah, the insiders bought up the bargains already and there’s nothing left for you. The truth might knock you over. With the right techniques, you can tackle the real estate market regardless of how strong or how depressed it is and with little or no money down too. The small amount of knowledge necessary is easy for anybody to pick up, but it’s impossible to find out unless you have a seasoned real estate entrepreneur looking over your shoulder. Don’t worry. Once you pick up on this easy-to-learn method of buying real estate, you are empowered. You don’t need a guru looking over your shoulder ever again. Knowledge is power. You will know how to start your search, where to find financing and how to put it all together with little or no money down. It’s taking the first step that’s always the hardest, but it’s really the smallest step of the process.
Real estate has been a dependable and valuable investment since the dawn of civilization. For most of that time, taking advantage of the real estate deals was the territory of a few savvy investors with an angle. Today, anybody can start the process of investing in real estate with a visit to a website or a simple phone call. Real estate can be the road to riches, untold wealth and great fun along the way, but you must have enough knowledge to get started. Like any business, you want to get off on the right foot. That’s why gaining the knowledge of an entrepreneurial expert is the difference between falling flat on your face or soaring like an eagle. If you have ever wondered why everyone else makes money hand over fist while you're left out in the cold, listen to this: The reason is knowledge. Knowledge is the great enabler. If you know how to recognize real estate deals, distinguish the financing options available, identify with and be aware of the tools of negotiation, you can start down the road to wealth and happiness too. Real Estate holdings have the potential to create an advantage in your life that you have never experienced before. The expertise offered to you is a valuable commodity that is difficult to put a price on. With the real estate market working for you, all the wealth you can gain will feel right because knowledge enfranchises you.
The number of new condos that sold in the Greater Toronto Area during the month of August 2013 dropped to a mere 633, making it the lowest level for that month in a decade, according to RealNet Canada Inc.
That is a 18% drop from the dismal 772 sales in August 2012. And way below the 1,923 sales in August of 2011.
Toronto’s condo market is cooling so fast it has policy makers in Ottawa worried that if the condo market collapses, the housing market might go too - and thus dropping Canada into the biggest recession we have seen in decades. (2007-2009 will seem like a minor blip).
The Finance Department and Bank of Canada are justifiably concerned.
Finance Minister Jim Flaherty expressed concern in 2012 that too many new condo units were being built, a phenomenon that will ultimately lead to a crash - especially since so many were being built on credit borrowed from Canadian banks. The Bank of Canada has said that such a financial crash will pose a threat to the country’s broader economy and possibly even hurt the US economy too as many American investors are amongst those investing in Toronto condos with the intention of flipping them for a profit.
Real estate agents, brokers and pundits (myself amongst them) say the warnings have already been having an impact on the market, by causing some buyers to think twice about getting in to the Toronto condo market. But is it enough to prevent a crash by warning people not to invest? Doubtful. Most of the investors are Americans or from overseas, and they're borrowing Canadian bank money to make the investment - so if a crash happens and they lose their investment, it will be Canadian banks left holding the bag because the foreign investors will just pull out and ignore any legal threats from afar. (Because if you hold a foreign debt it really isn't that big of a deal if you just avoid that country for 7 years or so.)
For his part Mr. Flaherty has tried taking a number of steps to cool the real estate market, most notably tightening the mortgage insurance rules 14 months ago. One of the changes he made was to cut the maximum length of an insured mortgage to 25 years from 30, a move that took a number of first-time buyers out of the market (and first time buyers are more risky) and cooled it down a bit.
But such moves won't deter the overseas investors, who see Toronto's real estate market as being stable and think they can beat the odds and make a killing in profit BEFORE the market collapses.
But looking at the sales records, it is obvious the market is slowing and will stall sometime in the next year or so.
The total number of new homes, both low-rise and high-rise, that have sold in the Toronto area so far this year stands at 16,775, making it the lowest year-to-date total of the last 10 years.
There were 777 sales of new low-rise houses during August. That is 43 per cent below the 10-year average for the month of August. So the slowdown is effecting the housing market, not just condo sales.
While a growing number of tall condo towers are dotting the city’s skyline, the amount of land that’s available for the construction of new low-rise homes is constrained because of government policies aimed at curbing urban sprawl and maintaining green space. That means that condo growth is the future of Toronto, but it has to be built at a sustainable rate.
The price gap between new high-rise condos and low-rise houses has widened to a record level of $222,149. The low-rise price index rose 8.1 per cent over the past year to a record high of $658,938, while the high-rise price index eked out a mere 0.1 per cent gain to $436,789. What it means is that homebuyers definitely want houses more - and it is driving up prices faster, whereas condos are considered to be more risky despite the lower prices.
The gap between the price of condos and houses averaged
about $75,000 between 2004 and 2011, but the gap has been growing at a fast clip
during the last two years now that condos are flooding the market and becoming cheaper comparatively.
Many people swear off condos entirely, stating that the maintenance fees are way too high - and this is true for some condo buildings where they have gone overboard on expenses.
The unsold inventory of new low-rise houses now stands at 7,247, RealNet said, while there are 21,028 new unsold condos.
The month of August also marked the fourth straight decline in high-rise inventory, as developers have been bringing fewer new condo units to market of late. But economists say that the number of new condo buildings going up that will hit the market in 2014 - and even more that will be finished in 2015.
So we will see that unsold inventory of condos rise from 21,000 to 30,000 or 40,000 within the next couple of years.
At which time prices should drop significantly, which means people with the money available should be able to buy a condo for a lot less money when the market bottoms out.
I just heard a radio ad advertising for a real estate flipping workshop - which was promising to teach amateurs how to flip real estate using other people's money.
That sounds like a horribly risky idea.
A bit like investing in high risk mortgages using other people's money...
And the workshop is proposing taking amateurs and teaching them how to do this - is a bit like taking people off the street and teaching them how to invest in subprime mortgages.
Great idea (sarcasm).
Amazingly breathtaking idea (more sarcasm).
I can't believe they are doing it (dripping with sarcasm).
It is bad enough that Toronto's real estate market is so "bubbly" that investors are now pulling out of Toronto because it is considered to be too risky, but now companies (which I am guessing are seeking to unload their bad investments on to unwitting fools who will be gambling with other people's money) are seeking to deliberately muck around with Toronto's already over-invested real estate market.
Its like having a giant cream filled balloon that is already close to bursting and selling it to a bunch of baby porcupines and then running away before the porcupines can pop the balloon.
Which means that the suckers who invest in real estate now - while the big real estate investment firms skedaddle out of here - will be the ones left holding the bag when the bubble does burst.
The mere fact that the big real estate firms are now ditching Toronto - while the getting is good - means they are now wary and skittish about the future of Toronto's overblown market.
When the Toronto real estate bubble does burst I am going to be saying "I told you so" again and again.
I am still predicting the bubble to burst sometime in 2015 or 2016.
Although now that some investment companies are looking to dump their properties it makes me wonder if it might happen sooner than I expect.
Flip This House (produced by A&E)
Flip That House (produced by the Discovery Channel)
The problem I have with these shows is that they emphasize making a profit off flipping a house (as opposed to finding a nice home in a neighbourhood you like).
I am not saying people can't make a business out of renovating houses and flipping them for a profit, but I find it disturbing that TV shows are actively promoting this idea in the USA (a country with a recovering real estate market that so recently had a market collapse / price correction).
To me it just seems... irresponsible. Like trying to sell guns in a town that recently suffered a school shooting.
Its a moral issue to me. Yes, people should look to find a nice home (and yes they should hope to eventually sell that home for a profit years later). But overemphasizing the idea of flipping houses for profit = overemphasis on greed. (And call me a traditionalist but greed is the root of all evil.)
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