Be bold or move to suburbia!

[pianoexcellence]

Depends on the deposit structure and how you financed those deposits.

My understanding is that with presale you can really leverage yourself, so a 60K return could be a great ROI, though probably not on a risk adjusted basis.

I flipped a presale in Squamish and with 10% down my leveraged ROI was 170% in 8 months. Less opportunity cost and all other fees it was more like 130% Seems great on paper...and don't get me wrong, I'm pumped to have the cash, but I have a friend who will go bankrupt because he pre-bought in Kelowna at the peak...Leverage is a piledriver on the way down.

Is that really a good rate of return considering the huge risk (not just to lose the DP but multiples more)?

For contrast...

I little bit ago, I bought $3000 of IVNM-OTC.BB (A shell startup company), looking for a contract from the Chinese Govt for bamboo harvest. If the contract goes through...though it is only a "shell" of a company now...it will be similar to a company (similar A--LOE) profile of a company that does the exact same thing and is trading at %10000 (yes.. ten thousand) of my share price.

If this goes through, this will be a ten-banger...at least...but the max I can lose is the 3000.

People now tell me that I am taking on too much risk...Listen to JH with all the "stock traders are gamblers" comments. My friends and parents would always cringe when I said "stock market", even though I am not using any leverage...and the TSX index div payout is only a little less than rental revenue on new homes.

Before when I told people that I had a presale condo, people I know did not blink an eye...even though I could have been on the hook for a huge potential loss.

Go ahead and watch the stock and laugh at me if it goes to Zero...I wont be losing any sleep. I know what REAL risk looks like...and I came out lucky.

[Austin]

I take great comfort in the ignorance of others. If they were a lot more savvy, I'd probably not do so well..

[MultipleOffer]

Woodwards required 20% down, so lets say it was a $300k 1 bedroom, then that's 60k down, 100% return on investment. If it was a 2 bed, 600k condo, then its only 50% ROI. Still not bad, but you could have done much better elsewhere. That being said, I really like the development and think that those units make for pretty good investments over the longer term.

[Greenhorn]

truth be told, a lot of the appreciation over the past 3 years was built into the Woodwards presale prices. Sure there are profits to be had if selling, but the Vancouver condo market trended up over 20% since the April 2006 presale. Woodwards sellers aren't seeing half of those gains. In retrospect, money would have been better invested in the resale market, and i'll bet many sellers are glad to be getting out with a small profit after weathering the '07/08 market dip... 60k is a nice profit for the development.. is that after clearing GST/PTT and closing/holding costs?

A close friend of mine owns in Woodwards and tells me if he sold today, he would make $60,000. This would be gross and commissions, net GST, PPT, finance fees and legal would come off of this. So what would his net be? $24,000 before tax. Could he claim this income as a capital gain or is it business income? So he makes $18,000 after tax. Not really worth it for the risk. He is not selling today because he feels prices will go up. People never want to sell when prices are rising. Weird. He owns a 1 bedroom in the tower that closed first a few months back and he found a tenant very easily. I posted about him when he first bought it.

[DAB]

$60k profit? wow, that's a lot of money just for waiting in line and having the balls to sign the dot line. and you do nothing, you make nothing, beside jealousy.

they deserve every bit of it. at the time of presales, there were already built units in downtown (better location) at a more cheaper price. but they took the chance and now it's paid off.

[MikeStewartRealtor]

I have several clients who have done very well at Woodwards. These people bought when the doom and gloomers on this forum were predicting the end was nigh....

[pianoexcellence]

$24,000 before tax. Could he claim this income a capital gain or is it business income?

Could be either depending on a number of factors...including but not limited to:

1) how long did he hold for? Longer holding is more likely to be convincing with Cap gains
2) what does he do for a living? If he is a Cop or doctor or something, it is more likely to be convincing with Cap gain. If he is a realtor, or daytrader, it becomes less likely
3) How often does he do this? First time is more likely to be a capital gain
4) what was the intended use?

And more...i went to a CA and was advised in my situation to go for the Cap gain. I was a piano teacher...it was a vacation home...It was my first time...the only thing going against me was the >year holding.

[honda78]

truth be told, a lot of the appreciation over the past 3 years was built into the Woodwards presale prices. Sure there are profits to be had if selling, but the Vancouver condo market trended up over 20% since the April 2006 presale. Woodwards sellers aren't seeing half of those gains. In retrospect, money would have been better invested in the resale market, and i'll bet many sellers are glad to be getting out with a small profit after weathering the '07/08 market dip... 60k is a nice profit for the development.. is that after clearing GST/PTT and closing/holding costs?

I was thinking that too...gross or net.
...ie what is on your tax return for Cap gains? 60k on a tax return is very different from "I made 60k sale price to sale price".
If you are claiming 60k as net profit...then that is pretty good.

Capital gain? I had a really unlucky friend being audited by CRA.... He flipped an assignment, didn't report anything, and was assessed 100% straight business income, plus GST, plus penalties.... Ouch!! I felt for him badly...

[pianoexcellence]

He flipped an assignment, didn't report anything, and was assessed 100% straight business income, plus GST, plus penalties.... Ouch!! I felt for him badly...

It's not black and white.

I would say that in many cases, it is straight income for presale flips. A lot of it goes down to intention. A lot of people went into presales with the intent to flip for profit. I went into it to buy a family vacation home. I sold for many reasons, including the fact that I wanted to prepare myself to go back to school, and have a paper trail to back that up. I also have a history of ski and rock climbing memberships to back up the "vacation home" concept.

If you are trying to say that your Surrey condo is a vacation home, you may have to try a little harder to back it up.

[MultipleOffer]

i think you are wrong about that...

I got this advice from a CA/CMA when selling earlier this year:

The CRA rarely looks at multiple sales of real estate as "business income" unless the number of trades become very large (say 50+ units per year). With the recession, 2 property sales in one year would likely been considered a a normal activity for liquidity, so I don't believe you have anything to worry about.

then i sold another and asked again....

The sale of 2 + 1 properties should not cause you to classify capital gains as business income for tax purposes, even if done over a short period of time (ie flipping). The main issue is the number of trades and I doubt if say 5 per year would cause a concern. Generally, you would want to file your tax returns showing the capital gains. If CRA somehow think your capital gain is business income then any future capital losses would be business losses. This could easily result in tax shelter losses against all income, which the CRA tries to avoid.

[Austin]

If CRA somehow think your capital gain is business income then any future capital losses would be business losses. This could easily result in tax shelter losses against all income, which the CRA tries to avoid.

Interesting, I wonder how exactly that would work - how you can use business gain status to create a tax shelter in the future.

[Warren12]

I have several clients who have done very well at Woodwards. These people bought when the doom and gloomers on this forum were predicting the end was nigh....

Can you be a little more specific?

From the stories of the others here, it seems like property sale values at woodwards are up 10-20% (the $60k example) from a pre-sale 3 years ago. Certainly not a disaster, but that's a rather risky investment.

Do you have clients who have seen bigger gains?

I'd like to see how the current batch of units sells.

[kansai_92]

i think you are wrong about that...

I got this advice from a CA/CMA when selling earlier this year:

The CRA rarely looks at multiple sales of real estate as "business income" unless the number of trades become very large (say 50+ units per year). With the recession, 2 property sales in one year would likely been considered a a normal activity for liquidity, so I don't believe you have anything to worry about.

then i sold another and asked again....

The sale of 2 + 1 properties should not cause you to classify capital gains as business income for tax purposes, even if done over a short period of time (ie flipping). The main issue is the number of trades and I doubt if say 5 per year would cause a concern. Generally, you would want to file your tax returns showing the capital gains. If CRA somehow think your capital gain is business income then any future capital losses would be business losses. This could easily result in tax shelter losses against all income, which the CRA tries to avoid.

While I think most people may get away with it, there's a difference between what's written in tax law and what may or may not transpire given the resources of CRA.
I sometimes park at a meter and don't pay with the full realization that I may incur a parking ticket.
Clearly Honda's buddy DID get audited. But you didn't. Luck of the draw maybe?

[Thompson]

I got this advice from a CA/CMA when selling earlier this year:

The CRA rarely looks at multiple sales of real estate as "business income" unless the number of trades become very large (say 50+ units per year). With the recession, 2 property sales in one year would likely been considered a a normal activity for liquidity, so I don't believe you have anything to worry about.

If I were you I will find another CA.

[Greenhorn]

I got this advice from a CA/CMA when selling earlier this year:

The CRA rarely looks at multiple sales of real estate as "business income" unless the number of trades become very large (say 50+ units per year). With the recession, 2 property sales in one year would likely been considered a a normal activity for liquidity, so I don't believe you have anything to worry about.

If I were you I will find another CA.

Same!!! You can't flip 50 properties a year and claim this as capital gains. MO, you are getting bad advice. You dealing with an accountant or a book keeper?