Land development

[PrimeTime]

Hello,

I have some questions on land development and was wondering if any REIN members have experience in this feild. My first question being how big does the down payment have to be on buying land? Are you able to put less down on the land if you are moving in? Do you have to pay a capital gain on the property? And how much do you have to put down for the construction of the house? feel free to e mail me at [email protected]

 

[Thomas Beyer]

I have done a few land deals and am doing two right now, and we built our own home in Canmore.



Budget 100% (i.e. all cash) for a raw land deal.



If you buy a residential lot with an intention to build you might get a loan with 25% cash own with complete plans and pricing for the full project if your income supports it, based on a draw schedule. So if land is $150,000 and house costs $250,000 for a total project cost of $400,000 you need $100,000 cash.



Yes you pay capital gains on land gains or development if it is an investment, unless it is for your personal home. So if you build said home for $400,000 and eventually sell it for $600,000 you can keep it all and pay no tax if you have lived in it for an extended period. Some people do this every 2 years or so until the spouse says "no more" and have made a small fortune doing it.

 

[PrimeTime]

Thank you very much Mr. Beyer that helped out tremendously. I am going to get started and if I have any more questions I will do another post. Thanks again.

 

[PrimeTime]

Hello fellow REIN members,



I have a question about foreign investments, I will be heading to California in May to visit my Aunt and Uncle which have said they are interested in the Canadian Real Estate market. I was told by someone that any foreign investment whether lived in or sold/rented right away would have a capital gain sir charge. I thought I would ask the panel of experts before I set it in stone and before I start my exit strategy If someone is able to help me answer this question that would be muchly appreciated.





Tory Feuer

 

[Thomas Beyer]

[quote user=PrimeTime]I was told by someone that any foreign investment whether lived in or sold/rented right away would have a capital gain sir charge.
It is called a "withholding tax". This is 25% for non-residents. You have to file a T2062 tax form for any non-resident.



So, if the non-resident buys land or any Canadian real estate for $400,000 and sells it for $500,000 years later for a $100,000 gain a Canadian would pay roughly 50% of the 39-40% income tax as a capital agin, i.e. about $19,000 to $20,000. In case of a non-resident $25,000 must be withheld and sent to the government. Then you can file appropriate tax forms and reclaim the $6000 over remittance, if you so chose.



I am not an accountant nor a tax expert, and it is highly advisable that you work with one for the details.