Ontario Tax Sale Property Forum
Tax Sale Forum => Introduce Yourself => Topic started by: cann on February 22, 2011, 12:12:24 AM
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Hi everyone. I heard that if you buy a house in Ontario, you cannot sell for a year. Is this true and would this also apply to the tax sale house?
Chris
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You heard wrong....you can buy a house and sell it the very same day if you want.
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The holding for a year is if you want to declare it as your personal residence and sell it without paying capital gains tax
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The holding for a year is if you want to declare it as your personal residence and sell it without paying capital gains tax
Can you provide a tax ruling that supports that assumption?
I always had the understanding that every situation is unique and will be judged on it's own merits.
In other words, it is possible to buy and sell a house in a lot less time frame as a year and still have it declared as a principal residence. Likewise you could still own a house for more than a year and CCRA will still balk at allowing a principal residence designation.
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The one year rule is for overlapping principles...ie. you can actually declare two of them at the same time for one year.
If I purchase a house and live in it for 6 months, then decide I (my wife actually) doesn't like it and we sell it...or we have to move as a result of a career transfer...it was my principle for that six months.
If I live in a house, and build another, then I move into the new one and sell the old one then they were both my principles...if I hold onto the old one and rent it out, then it was only my principle for the period I lived there plus one year....the rest of the time, it was an income property...even if I didn't charge them rent (that would be a relative of course...probably your wife's no good brother).
Each situation is of course different...years ago, there was a fellow who built a house a year, never lived in any of them, and claimed them all as principles...when CRA caught up to him, they found that he was not eligible to declare any of them, and that further the building of a house a year was his business and he had to pay full taxation on the profits (no capital gains)...plus an appropriate penalty for trying to cheat the Queen.
Talk to a good Accountant before you do anything...each situation can be a little different. 8)
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Can anyone tell me how renting out a basement apartment in your principal residence affects the principal residence designation?
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Can anyone tell me how renting out a basement apartment in your principal residence affects the principal residence designation?
Im pretty sure it doesnt....my friend has been doing it for years.
1. he doesnt report to anyone that they are living there.
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Other than you top dogs being rich, whats the best way to round up large amounts of cash to pay for a tax sale (before you can get a mortgage for it)? I can't get that much out of my own mortgage.
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Other than you top dogs being rich, whats the best way to round up large amounts of cash to pay for a tax sale (before you can get a mortgage for it)? I can't get that much out of my own mortgage.
loan from relatives
loan from private lender ( big interest )
or
dont bid unless you have the cash ....
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There are ways: take on 1 or more partners, find a financing/mortgage specialist who will give you a wrap-around mortgage, etc. You have to treat your situation something like no-money-down real estate deals: who will trust you if you get creative? You will need this and more: non-disclosure agreements, partnership agreements, complete financial plan as to why this particular deal will work out, your plan on what you will do if it doesn't, divorce agreement if you lose the house, conditional financing commitment, etc. I've done a few deals using 100% financing, and they worked out for me, but I had contingency plans for every conceivable scenario, so it really requires a lot of thinking & planning, and the willingness to lose it all. If that's too much for you, you will have to save your money 'til you're ready to do it on your own.
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Thanks for the feedback.
As always, great site.
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Other than you top dogs being rich, whats the best way to round up large amounts of cash to pay for a tax sale (before you can get a mortgage for it)? I can't get that much out of my own mortgage.
Lonewolf:
I would be careful about how much debt you take on for a single property because of the risk factors. THE LAST THING YOU WANT IN THIS BUSINESS IS TO HAVE YOUR FINANCIER CALL YOU AND STEAL YOUR PROPERTY. People tend to forget that the purchase cost is just the first phase. The total cost is how much it costs to bring something into saleable or usable condition particularly if you are buying tax sale property with a structure.
Rehabilitating a structure can cost much more then your original investment unless done carefully. If you get an order to comply from the local building department, things are not under your control.
The basic problem in tax sales are that circumstances are usually such that we cannot do a proper inspection before the sale, and recent changes regarding things like grow ops and associated mold, greatly increase our risk. If you think a grow op is bad news I hope no one on this board has to ever face a crystal meth lab.
We are buying as is with all associated risks. I mean with the price of copper being what is is we may/will not have any plumbing for example. When they strip it out it destroys the walls as well.
The top dogs as you called them (I am still a newbie) I believe as not as rich as you referred to but are smart. They are very particular in what they buy and as such control their risk very carefully.
This year so far has surprised me. Its like a friendly pocker game that the guys have decided to raise the betting limits much higher. Both the risks and the potential rewards
on a single hand have increased. Make certain you don't have to fold because of a single hand.
Some of the stakes are ones that I will not play in because of the risks although the rewards are tempting. Like baseball you can get to home plate with a number of singles or with a home run. Remember the guys who hit the home runs also have the most strikeouts.
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DF1:
The renting of a basement or any part of your house does not affect your principle residence deduction provided that you do not deduct depreciation (CCA for tax purposes) as part of the rental expenses and you still live in the house on a normal basis.