If you want to invest in real estate, then you may have heard about the terms used in this industry. Preconstruction condo flipping is a common term used nowadays. This means that you are selling your purchase contract of a particular unit that is not in existence. It is a good investment strategy and it can bring high returns on your investment. Unfortunately, it was in news for some wrong reasons.
If you are interested in flipping a preconstruction condominium, then it is imperative at your part to understand this controversy. We will discuss why these transactions were drawing the attention of the media and what you need to do to safeguard yourself as an investor.
Understanding preconstruction condo flipping
The term preconstruction condo flipping means assignment sales. It is obvious that you cannot sell a preconstruction condominium because it is under construction. Anything that does not exist, you cannot sell it. In this situation, what you sell is your contract with the real estate developer or builder. This is the reason why the person who is purchasing the contract from you cannot negotiate. He is supposed to agree with the terms and conditions already mentioned in the assignment, and he is supposed to deposit the same amount.
There may be several reasons why you are selling your assignment. We all are aware that a preconstruction condominium may take several years to complete. During this time, youmay be transferred or relocated to a different city. In this situation, you can sell your contract with the builder.
The difference with flipping is that you are signing the purchase deal with the intention of selling it. You are buying pre construction condo to get a good return.
Last year preconstruction condo flipping was making headlines in Vancouver and Toronto. Several sellers made large assignment sales; they did it to avoid paying taxes. This was the reason why Canadian Revenue Agency started keeping a strict vigil on these cases.
As far as Ontario developers are concerned, they are not supposed to report their details to the government. All the transactions remain private.
The government of British Columbia is willing to create a database to track preconstruction condo flipping. This database will contain comprehensive information and this will be available to all provincial authorities.
There is no doubt that buying pre construction condo is a profitable investment, but sellers are supposed to know about the rules and regulations. If you are aware of taxation rules in accordance to your precise situation, then you will make a wise decision.