All Forum Posts by: David Slater

Sorry @Will Fraser, I should have noted in my subject/post - question is for Canada - HST = Harmonized Sales Tax

Pay HST or not? We are looking a different properties to flip. Our investor has come back saying his accountant recommended to walk away as the post reno sale will be subject to HST substantially hitting his (and our) bottom line.For those that have been involved in flips, have you been subject to HST and if so - why/when? I believe the magic number is 90% of the property renovated triggers HST but in doing some research it seemed a little subjective. E.g. If the the exterior structure is not touched - how does that factor in? If the basement is not reno'd. etc.

In my research and learnings (courses, videos, etc) I have never seen anyone factor in HST on their calculations when looking at a property.

Would be great to get input from both renovators and investors on this.

One site/article that I thought was quite detailed is https://www.bakertilly.ca/en/btc/publications/indirect-taxalert-are-sales-and-renovations-of-used-residential-house. 

Thanks.

Question re JV flip arrangement on the risk side. I apologies if it's covered already but I could not find this specifically in my search.

We are looking at a property flip JV where 'Party 1', the investor, secures the purchase financing (either funds it or mortgages it) and covers the purchasing and selling costs as well as the carrying costs for the property (let's say $550k). 'Party 2' finds the property, covers all reno related costs (let's say $225k), manages the project start to end, manages the sale of the property.

The split proposed is a 40/60 (Party 1 to Party 2) after all Party expenditures are covered.

Simple example - Property purchase at $475k. Purchasing, carrying, and selling costs net $550k. Reno/repair costs $225k. Property ends up only selling for $550k.

The question is, what is the typically arrangement on the very off chance that the project end up in the red overall - like the above example? Is it:

a) Party 1, the investor, gets paid back first, then Party 2 - putting the majority of the risk on Party 2. In this example Party is out $225k

or

b) There is a 40/60 split on the loss too. i.e. Party 1 is out $90k, Party 2 is out $135k

If b), does anyone have sample agreement language for that?

Lastly, and I hate to drag on this post, but in the above JV scenario, what is the typical title/lien arrangement to cover that side of the risk between the parties? Not sure how much it factors in but this would be in Ontario Canada.

Hopefully I put this in the correct forum.

Thanks