The Real Estate Price Trap! How Do You Sell?

[UTCVenturesLtd]

For those flipping, you pay on the income of your stock at full rate. If the price goes up during that time, you are quickly out of the market. I watched an acquaintance do that in the Crowsnest Pass. He made a killing, but had to buy in the same market that faded away taking his profits as well since he had to buy back in the same area that he like to work in. Can you move from a principle residence for a year, live in a flip as a principle residence, then sell it and just return to your old principle residence and keep your profits tax free just so long as you do not repeat this.

For those who buy, hold and rent and get capital gains, the same problem, but not as dramatic. You sell, and pay your capital gains and then if you try and buy something in the same area, you are not able to do a lateral move even after the realtor`s and lawyer`s fees plus paying the capital gains. It would be nice if you could roll over you money into another property tax free so long as you stay in real estate.

With a lot of the real estate information you pick up are strategies to buy and hold and rent, but how do you ever sell off your properties down the road without getting clobbered in taxes? Is it much better to just hold them in a corporation and gradually sell off your shares? Nobody seems to tell of the best way to exit property. It is usually hold, refinance and buy more. We all have to retire at some point.

 

[ChrisDavies]

Flipping and living in it for a year will only get you nailed by CRA, because your intention is still to flip for profit.

Buy and hold is better because it remains a capital gain. I don`t mind paying taxes; it means I`m making money. There was talk in the last federal election about a capital gains tax rollover (like the US 1031 exchange).

For less than 30 or so single properties I still think it`s better to hold personal and sell of over time, accept the capital gain and go spend some time on a warm beach (or a cold Irish one).

 

[luckyluciano]

I like to buy my base, pay it off and live off the income. Buy quality and hold.

 

[invst4profit]

If you have properties with good positive cash flow you could chose not to claim capitol depreciation. This is possible during your higher income earning years allowing you to sell and not have to pay back that amount. This allows a larger pay off to reinvest in your retirement years.
Personally I like to refinance as properties are paid down and reinvest as I go along so as to benefit from compounding interest.
When I sell I may see very little cash but I have benefited from investments with far greater returns along the road.
Another option if you are the type to park your cash in a property is to offer a VTB to your buyers. Take enough down payment to cover the costs of the sale and benefit long term as the banker.

 

[stevegwhite]

Here`s a link to a proposal to allow capital gains rollover, which allows you to hold off on capital gains payments if you are reinvesting into another property.

http://www.crea.ca/public/federal_affairs/reinvest.htm

Can anyone shed any light on the status of the proposal or how far along it is?