Real Estate

Capital Gain on Preconstruction

  • Last Updated:
  • Feb 19th, 2018 10:19 am
[OP]
Deal Addict
Feb 9, 2013
1808 posts
776 upvotes
Mississauga

Capital Gain on Preconstruction

Hi I have a condo that's about to close. It was purchased 4 years ago for $400k, and is now worth $650k approximate.
If I make this my primary resident, then I don't have to pay for the capital gain appreciation when I sell.
However, if I make it as an investment property, do I have to pay the tax for capital gain of ($650k - $400k) = $250k during the construction of it?

Let's say after 5 years I plan on selling it.

Scenario 1: after close I live in it for 1 year, then rent it out for 4 years
Scenario 2: after close rent it out immediately for 4 years, then live it in for 1 year

I understand the years I rent it out I have to pay tax. But not sure how the $250k is taxable or not.
20 replies
Deal Addict
Dec 23, 2010
1897 posts
929 upvotes
Moon
From what I understand most builders give you a price based on the fact you will occupy the unit for personal use. This is what gives you that HST discount and this clause would be in your purchase agreement. Thus Scenario 1 would mean that all appreciation that occurred while the unit was being constructed is not taxable. Scenario 2 is likely against your purchase agreement.
Last edited by Applesmack on Feb 15th, 2018 4:48 pm, edited 1 time in total.
Penalty Box
Aug 11, 2005
4175 posts
1427 upvotes
Do people not research b fore they buy?

Or do they just blindly buy real estate cuz it gots to go up to da moooon?
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Deal Addict
Dec 23, 2010
1897 posts
929 upvotes
Moon
Luckyinfil wrote: Do people not research b fore they buy?

Or do they just blindly buy real estate cuz it gots to go up to da moooon?
Anything is better than being a priced out renter so people tend to buy pretty fast.
Penalty Box
Aug 11, 2005
4175 posts
1427 upvotes
Applesmack wrote: Anything is better than being a priced out renter so people tend to buy pretty fast.
U forgot to mention to the mooooon.
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Penalty Box
Aug 11, 2005
4175 posts
1427 upvotes
But you may be too busy being house poor
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Penalty Box
Aug 11, 2005
4175 posts
1427 upvotes
Too da mooonnn

Image
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Member
Mar 6, 2017
382 posts
259 upvotes
jdu0ng wrote: Hi I have a condo that's about to close. It was purchased 4 years ago for $400k, and is now worth $650k approximate.
If I make this my primary resident, then I don't have to pay for the capital gain appreciation when I sell.
However, if I make it as an investment property, do I have to pay the tax for capital gain of ($650k - $400k) = $250k during the construction of it?

Let's say after 5 years I plan on selling it.

Scenario 1: after close I live in it for 1 year, then rent it out for 4 years
Scenario 2: after close rent it out immediately for 4 years, then live it in for 1 year

I understand the years I rent it out I have to pay tax. But not sure how the $250k is taxable or not.
If you live in it you don't have to pay anything when you sell

if you you sell it right away you will have to pay capital gains and the HST portion

if you rent it out first you will have to pay the HST up front and then apply for the HST rental rebate and then you have to pay capital gains when you sell

You can deduct certain expenses related to closing costs to offset some of the capital gains but you definitely need to speak with an accountant who has experience dealing with investment property especially new construction
Deal Addict
Dec 23, 2010
1897 posts
929 upvotes
Moon
Mitts87 wrote: At least they Won't have to pay any tax
Nobody flips a principal residence like that so that is a HUGE capital loss the investor will be able to use for years to come.
[OP]
Deal Addict
Feb 9, 2013
1808 posts
776 upvotes
Mississauga
Luckyinfil wrote: Too da mooonnn

Image
TBH the sellers probably don't care about 500k loss. What's more important is that they washed their "dirty" money and made $1.8M clean money. And please stop hijacking my threads!
Penalty Box
Aug 11, 2005
4175 posts
1427 upvotes
Applesmack wrote: Nobody flips a principal residence like that so that is a HUGE capital loss the investor will be able to use for years to come.
Can’t claim capital loss if you aren’t a Canadian resident
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Jr. Member
Aug 24, 2010
128 posts
124 upvotes
Luckyinfil wrote: Too da mooonnn

Image
What’s the point of your post? The OP made a huge profit in 4 years. I wish i put my savings in to a pre con condo than maxing out our TFSA’s. (never thought condos would go up)
Deal Guru
Feb 22, 2011
10471 posts
12990 upvotes
Toronto
Delilah14 wrote: What’s the point of your post? The OP made a huge profit in 4 years. I wish i put my savings in to a pre con condo than maxing out our TFSA’s. (never thought condos would go up)
If you check his post history he's been really angry that he can't afford a property since 2013. He's become jaded and obsessed. Just imagine what kind of person spends their entire day in a forum about an asset class they know they will never invest in. That's like me spending hours every day for half a decade in the bitcoin thread trying to convince others not to buy bitcoin, makes no sense.
Deal Guru
Feb 9, 2009
11290 posts
9796 upvotes
Congrats on the appreciation. A guy like luckyinfil could have bought 4 years ago and made gainsss but instead was too busy making threads about re crashing.
Penalty Box
Aug 11, 2005
4175 posts
1427 upvotes
Sanyo wrote: Congrats on the appreciation. A guy like luckyinfil could have bought 4 years ago and made gainsss but instead was too busy making threads about re crashing.
Why do they have to be mutually exclusive?
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Jr. Member
Aug 24, 2010
128 posts
124 upvotes
rjg4235 wrote: If you check his post history he's been really angry that he can't afford a property since 2013. He's become jaded and obsessed. Just imagine what kind of person spends their entire day in a forum about an asset class they know they will never invest in. That's like me spending hours every day for half a decade in the bitcoin thread trying to convince others not to buy bitcoin, makes no sense.
Ok that makes sense. I also got the fact that he works for Wynne bag, which explains a lot as to why he has so much time to waste on these online forums Winking Face because obviously she and her clan don’t really do any real work
Deal Guru
Feb 22, 2011
10471 posts
12990 upvotes
Toronto
SamS2016 wrote: looks like a sore loser ... the previous sale did not go through...
He's laughing a house in the suburbs "only" sold for $1.8m, he posted previously that he would never be able to afford a house for $750k in Markham. 5 years later he's still posting lol.
Deal Addict
User avatar
Dec 13, 2016
3756 posts
3257 upvotes
With all the money these renters made on Bitcoin they could easily afford 2-3 mil dolla houses.

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