Seven things not to do:
- Don’t underestimate the amount of time it will take to sell the property. Have enough money to cover the mortgage, property taxes and maintenance costs for as long as it takes.
- Don’t underestimate the cost of the renovation, or overestimate the ultimate sale price.
- Don’t neglect to factor in the smaller items in your renovation cost projections. People worry about the big-ticket item but things like new doorknobs add up.
- Don’t call an accountant after the deal is done. How the financing is structured can have significant tax implications.
- Don’t underestimate the time it will take to manage your tradespeople. Get several contractors working at the same time in different areas. Linear planning will result in higher costs.
- Don’t rely on shoebox bookkeeping. Clean records will result in tax savings.
- Don’t lump all costs together. Some will be immediately deductible, others can’t be written off until the property is sold. Understand the difference and plan accordingly.
Source: George Dube, a tax partner with Kitchener, Ont.-based Dube & Associates Chartered Accountants
