All Forum Posts by: Dave Vogt

I did end up buying a student rental in St. Catharines and just got a lease signed from students. So I am looking for the next project.

I am definitely interested in picking your brains and learning from you. My goal is to buy, fix and hold. Truly appreciate your offer and I will be in touch with you in the next few weeks

I know a great student rental guy who has years of experience. I could introduce you. He manages a lot of student rentals and he knows his stuff. Rents to a group of students and get them to be accountable for one another. If one leaves then the group needs to find another person to pay the rent.

He checks up on things frequently and has some good lease agreements specify for student rentals.

You are welcome to pick my brain any time...some people say there isn't much to pick, but I try and ignore them..

Dave

I'll side with Mehran Kamari, I too am not seasoned enough to contribute ... If I were, I'd pitch-in side-bars on "investing in Canadian Real Estate" as things are, understandably, a little different up here.

Roy don't sell yourself short. Seems to me you would be able to contribute a lot just from our few conversations.

As a fellow Canadian, house flipper, and hands on renovator ( crazy I know) I myself am not sure how much help I can be, but I would be happy to share if you think it would beneficial.

Maybe we could start a Canadian section on the forum and start building that up for you guys at BP.

Originally posted by @Gary McGowan:

@Dave Vogt
Where are you buying properties for 100k?
If in Canada, are you paying HST on the flip? I know of a handful of Investors/Flippers here in Toronto where the CRA has just come done on them with a HST bill. HST is due because there was extensive renovations done to the property. The argument is > What is extensive renovations???
HST is due on the difference. Selling Price - Purchase price - any HST applicable costs = X
This can really eat into your profits...

Gary:

Where I do not flip, I would have to check on this, but for residential properties, Dave likely would not be collecting HST if he were just affecting small updates (bathroom, maybe kitchen) and repairs (new floor, painting). However, if he make substantial improvements (an addition, a second story, a garage) then he has to collect HST as a new builder would {Here, I'm not certain if he only collects on the portion deemed to be an improvement?}.

The magic is determining where a "substantial change" to the original building starts - from the CRAs perspective. I am sure there are many to stride across this grey zone and those of the boyz & gals getting surprise gifts from the Taxman.

If he is not collecting HST, he does not have to remit it. The downside to that would be if you are not collecting HST, you cannot deduct tax (HST) offsets for your inputs.

We have just finished going down this road. Several hours on the phone with CRA. A giant pain in the back side.

90% renovated is the magic number for CRA. To me that says if you leave the foundation....probably 20% of the structure you should be fine, but good ole CRA have there own pie in the sky idea of what this 90% is. I think that the issues with illicit drugs has made it's way to the CRA. They must be smoking something at least. I know 4 yr olds that are better at math then these people. I wish I could make up the rules in math class....it would have been so much easier.

Sorry I got off on a tangent there.

We haven't had this issue to deal with as to Gary's point we don't do enough to constitute paying HST, but we also don't get to use input tax credits and must include all of the tax as an expense for materials. It sucks, but hey it works. We have only once come close to their 90% rule and we fought it tooth and nail. CRA was unable to determine what constitutes 90%...big surprise. So yes they need to define this grey area so much better than they currently do.

Our government has figured out how to tax bit coins, the least they could do is figure out what a 90% renovation is.

@Gary

In our area our average purchase price for a flip ranges between $60K and $120K. They are everywhere. We just put a property under contract in Virgil a few kms from Niagara on the Lake. The offer was for $230K and ARV is $315K this is an expensive area for us in the Niagara Region. That is why in previous post I mentioned the outward trend of Toronto and why our area continues to grow and yet is affordable to buy flips and rentals. Sorry Roy for bringing this up again. I know our little secret LOL!

With all this tax stuff I am still learning and it is awesome bouncing ideas off everyone here. Learn something new everyday!

Dave:

I hate to be the barer of disappointment, but dividends you draw from your company are not tax free. Dividends in your hands are "grossed-up" to 125% of face value and then subjected to the dividend tax credit of 13.33% {our cash starved government is looking at changing these amounts in a manner which looks favourable to the uninitiated, but will actually increase the overall tax on dividends by ~2%).

In NB it works out to about a 25% tax rate, in Ontario the rate is ~29% (33% if your income is >509K).

It's been a few years since I had this discussion with my accountant. As per usual if there was a way around paying taxes our government has installed a road block to ensure we pay and then pay some more. I am visiting with my accountant again shortly and I am sure I will see that this is the case. Can't blame a guy for getting excited about paying a few less dollars in taxes.

Too bad you don't live closer Roy. I could use a good tax consultant. Seems like you know your stuff. I will keep you guys posted and give you an update when I revisit this.

I never thought of running a sole proprietor business as a house flipper. To be honest I am glad I incorporated right away and built the business up that way vs. personally. Now my business shows some merit on paper to grow it into the future. It takes a long time for an incorporation to gain business clout and lending status.