Flipping condo units is a form of speculating where an investor buys a
per-construction condo unit from the builder prior to the unit getting
built. Then just before the unit is read for occupancy, the investor
sells the unit as an assignment, in effect putting the sales agreement
into a new purchaser's name.
The investor pockets the profits, after expenses, between the price
that he bought the unit for and his re-sale price.
To make this work, the investor needs to get an assignment clause from
the developer as part of his original sales agreement.
A different form of flipping is when a handyman buys a re-sale condo
unit, perhaps a power-of-sale at a low price and then spends a few
thousand dollars and many hours renovating the unit.
He then sells the unit for a profit. Some people make a good living
Is there money to be made?
You bet. In a hot market, lots. In the period between 2010 and 2017
flippers, at some downtown Toronto condos, made as much as $2,400 a day
flipping condo units. (Source: Globe and Mail, 05 May 2017.)
Of course there is.
If the markets crash, and they have a three times in my lifetime, then
flippers can lose their shirts when buyers are harder to find than
winning lottery tickets.
If they do not have the money to close on the deals or if they cannot
obtain or carry the mortgage on their units, depending on how badly
leveraged they are, they could go bankrupt.
is the tax man
Gains made on the sale of one's primary residence are tax exempt under
CRA rules. But there are conditions a residence must meet to qualify —
one of which is that the taxpayer, or the taxpayer's spouse or
children, must have lived in the unit "at some time during the year."
Some flippers are now having their income taxes audited and now must
pay taxes on their undeclared profits.