This journal entry was written by me, Brandon Nolet, in the context that I’m looking far…to the horizon. And I’m doing flips. Okay, dropping the jokes, I want to flip some real estate, and there’s some finance shit I wanna talk about too.
Flipping Real Estate
If anyone is not familiar with the concept of flipping real estate, here follows a basic definition. Flipping is when one purchases a property for the purpose of renovating it with the aim of selling it for an improved value.
When I was growing up, I did a lot of household construction work with my grandfather and step-dad. Putting in a new staircase, building a new backyard shed, and putting up new walls for a new bedroom were all things that I got to do during my adolescent years. As such, I feel like I have at least the common sense required to be able to perform renovations on my own.
I don’t anticipate, however, doing all the renovations without the guidance of an experienced contractor. As much as I know about construction, and as much as I can learn on my own, I don’t think that I can successfully flip a house without at least some guidance. There are tips and tricks and gotchas that I’ll need to know about to make the process go smoothly.
As this is something that I’d like to do only in a few years from now, I don’t think I’ll go into much detail.
As this would be the first time I’d be flipping a property, I’d like to start with renovating a condominium rather than aiming higher and getting a single family home. By going for a condo, I also reduce the amount of money I have to put on a down payment for the mortgage.
I’ll probably be aiming for around the $200,000 CAD range and giving a quick look, the neighbourhood I want to live in has a decent amount of offerings. As well, from pictures, I see that the properties are of decent quality, but not so high quality that there’s little improvement to be made. I’m hopeful.
A big part of this is that I’ve recently found out about two pieces of a savings and pension plan that someone like myself can take advantage of here in Canada.
In Canada, there’s something called a Registered Retirement Savings Plan or RRSP, for short. This is a savings plan that one contributes to up until the age of 71 up until which you can choose one of these options. These options determine how you receive the income on the money residing in your RRSP. Amounts contributed yearly are deductible from your taxable income.
If you’re close to a higher tax bracket, this is one way to reduce the amount of tax you have to pay by a marginal amount, resulting in a return on tax amounts paid for the fiscal year in question. Even if you’re not on the edge of a tax bracket, however, it could still result in refunds, depending on how much you or your employer withholds for tax contributions.
In short, amounts contributed to an RRSP are tax deductible, until you’re receiving the money as an income when you retire. Any amounts withdrawn before that are both taxable as income and could result in penalties by the institution offering the RRSP account.
The second piece of information I stumbled upon is that there’s somethign called the Home Buyers' Plan. This is an exception to the previous paragraph’s “taxable income” part. When a person is purchasing their first home, they are entitled to withdraw $35,000CAD from their RRSP, tax-free. This is on the condition that that money is “paid back” to the RRSP within the fifteen following years.
So this is all to say that I’ll be contributing, as much as possible, to my RRSP account when I open it. Then I’ll be using that $35,000CAD to purchase my first property.
I hope some of you follow suit if you’re in Canada, or have a similar savings and pension plan available to you. I’m excited for the prospects available. After flipping the first condo, I plan to flip one more property, and use the profits from that property to actually buy a home.