Flip or hold?
Run the same property both ways, after tax, then stress it until it breaks.
Country
Your deal
Every figure below is yours to change, and the verdict updates as you type. Nothing is sent anywhere; the numbers stay in this browser.
Location and taxes
Combined federal and provincial rate on your next dollar of income.
Purchase and renovation
Leave at 0 to estimate from your province and city.
Financing
Flip
Replacing 90 percent or more of the interior makes the sale subject to GST/HST, like a new build.
CRA usually treats buy-to-resell profit as business income. Uncheck only if you can show investment intent.
Hold and rent
Defaults to the recent provincial guideline, which is re-set every year, so check the current number. Ontario units first occupied after 15 November 2018 are exempt.
Only the building depreciates, never the land.
Verdict
Flipping wins by 5.3 points a year
The flip annualizes to 13.9% over 7 months, against 8.6% a year holding. That assumes you can put the cash straight into another deal this good.
Flipahead
13.9%
annualized over 7 months
Hold
8.6%
a year over 10 years
Standard assumptions, nothing stressed.
Scenario
Flip
$19,170
profit after tax
Hold for 10 years
8.6%
a year after tax, internal rate of return
Warnings
ProblemSold inside 365 days
The residential flipping rule makes the whole profit business income. No capital gains rate and no principal residence exemption.
ProblemNegative cash flow
The rental costs you $644 a month after the mortgage in its first year.
WatchNegative leverage
The cap rate (3.5%) is below your mortgage rate (4.29%). Borrowing is making returns worse, and the profit leans on appreciation.
WatchRent growth capped
You entered 2.5% growth, but the legal cap is 2.1%. The model uses the cap.
NoteQualifying at 6.29%
Lenders test your payment at $3,154 a month. Many count only 50 to 80% of rent toward it.
NoteNo 1031-style rollover in Canada
Selling a rental triggers capital gains and recaptured CCA in that year, with no way to defer either.
Stress test
The useful question is not whether the base case works. It is how much has to go wrong before it stops working.
What hurts most
Each risk taken to its severe level on its own, never combined, so you can see which one actually decides the answer.
- Sale price below expected+41.0 points
- Project delay+10.4 points
- Renovation overrun+7.8 points
- Slower appreciation−5.1 points
- Interest rate at purchase+2.1 points
- Rate at mortgage renewal−0.9 points
- Extra vacancy−0.7 points
- Slower rent growth−0.6 points
- Surprise repair in year one−0.4 points
A positive number tilts the answer toward holding, a negative one toward flipping.
How it calculates
Flip profit is taxed at your marginal rate as business income when the sale happens within 365 days, which is the residential property flipping rule, or whenever the business income box is checked. Otherwise half the gain is taxed. British Columbia's home flipping tax is 20 percent of profit inside a year, tapering to nothing at two years.
Mortgages use Canadian semi-annual compounding and renew at your expected renewal rate every term. Breaking a mortgage mid-term is charged three months' interest. Lender qualifying uses the greater of 5.25 percent or your rate plus two points.
Rentals claim capital cost allowance at 4 percent, class 1 with the half-year rule, on the building plus the renovation, and only up to net rental income. It is fully recaptured at sale. Land transfer tax uses published provincial brackets plus Toronto's municipal tax; the smaller provinces are approximated.
Tax rules and rent guidelines change every year. Treat this as a first screen and confirm anything expensive with an accountant.