Definition
A real estate flip involves acquiring an undervalued property (estate sale, renovation needed, foreclosure), renovating it quickly, and reselling at a higher price in a short time frame (generally less than 12 months).
Tax treatment in Canada (since 2023 anti-flip rule): - If the property is resold within 12 months of purchase: the gain is deemed business income taxable at 100% — the principal residence exemption does not apply, and capital gain treatment (50%) does not apply either. - If the property is resold after 12 months: ordinary treatment applies (possibility of capital gain, principal residence exemption if applicable).
Financing a flip: - A-lenders: reluctant to finance (they see the transaction as risky) - B and private lenders: specialized, often offer short-term financing (1-2 years) at higher rates - The after-repair value (ARV) is central to the financing calculation