# Looking to build own house



## rav1 (Dec 14, 2015)

howdy folks.

my 1st post here. We are looking to tear down our house and then build a new one. i want to eventually move into the building business and looking for suggestion on how to approach this. 

some questions that come to mind.

1. Is it better to build this new house at an individual level ? or better to do this at a business (of course this means creating a new company)?

2. for mortgage, i understand there r 2 options available again .. home owner vs. construction mortgage. so far i understand the construction mortgage comes with an added cost. i don't know which route will be better in the long run. there is always a possibility that we may want to sell the house after living in it for a while. 

3. can accountants specializing in RE help set this up efficiently or provide a template so the model is optimized and minimizes our tax burden? i would love to start with an accountant who can assist with this.

please consider this is our principal property and we currently live here. look forward to having a great dialogue.

thanks much!


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## Mortgage u/w (Feb 6, 2014)

1. There is no real benefit to registering a company for building an owner occupied property. There's no income/expense for you to declare.

2. For the mortgage, all depends your financial situation and cost of your build. For example, you can simply refinance your current property and pull out as much equity as possible. Currently you can get up to 80% of its current value. If this is sufficient for your build, then your all set. If you have limited equity, then you have no choice to get a construction loan. To do so, you'll need to present your lender with the engineering plans and an official cost estimate as well as the city permit. Lender will appraise the future value and grant you a mortgage accordingly. You'll be financed, usually in 3 disbursements (once when foundation is done, then the envelope and finally once its all finished). It can get costly and very complicated if you go over budget so stick to the plans as much as possible.

3. You don't need an accountant for this. You're just building a house to live in. Once you decide to build others for the purpose of selling, then you will need to open a company and get an accountant to manage your income and expenses. Until then, you have no need.


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## rav1 (Dec 14, 2015)

*looking to build house*



Mortgage u/w said:


> 1. There is no real benefit to registering a company for building an owner occupied property. There's no income/expense for you to declare.


I was thinking about the GST .. for the fees that i hv paid to surveyor or early estimates that i hv got from engineer etc. i have been charged or quoted GST on those. I was thinking that as a business i will be able to get credit for those .. not?



Mortgage u/w said:


> 2. For the mortgage, all depends your financial situation and cost of your build. For example, you can simply refinance your current property and pull out as much equity as possible. Currently you can get up to 80% of its current value. If this is sufficient for your build, then your all set. If you have limited equity, then you have no choice to get a construction loan. To do so, you'll need to present your lender with the engineering plans and an official cost estimate as well as the city permit. Lender will appraise the future value and grant you a mortgage accordingly. You'll be financed, usually in 3 disbursements (once when foundation is done, then the envelope and finally once its all finished). It can get costly and very complicated if you go over budget so stick to the plans as much as possible.
> 
> 
> 3. You don't need an accountant for this. You're just building a house to live in. Once you decide to build others for the purpose of selling, then you will need to open a company and get an accountant to manage your income and expenses. Until then, you have no need.


there is a likelihood (m exploring that right now) to build 2 units so good possibility that there may be 2 possible lots that can come out from subdividing. in this case, i would like to build 2 units - one to live in and the other one to sell. And that's why i was thinking about accountant and company.


this will be my first building project so if i appreciate any other sighters as well. if there r any other sources .. book? workshop? etc. i m all ears.

thanks to all.


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## Mortgage u/w (Feb 6, 2014)

rav1 said:


> I was thinking about the GST .. for the fees that i hv paid to surveyor or early estimates that i hv got from engineer etc. i have been charged or quoted GST on those. I was thinking that as a business i will be able to get credit for those .. not?
> 
> 
> 
> there is a likelihood (m exploring that right now) to build 2 units so good possibility that there may be 2 possible lots that can come out from subdividing. in this case, i would like to build 2 units - one to live in and the other one to sell. And that's why i was thinking about accountant and company.


You can't claim credits if you are not declaring any revenues or profits. We established that the owner-occupied property will not be taxed once sold. Now, even if you build a second unit and sell it, you'll be taxed at a personal level on 50% of the capital gain. If you incorporate, you'll incur fees for the set-up and although you'll be taxed at a corporate rate, you get taxed on the full profit amount (not 50%). Then, any income you derive from the corporation will again be taxed on your personal income. 

If you're planning to build multiple homes throughout the year, then you'll have no choice to register a company. But if its a one time thing, its really not worth it.


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## rav1 (Dec 14, 2015)

" .. Now, even if you build a second unit and sell it, you'll be taxed at a personal level on 50% of the capital gain ... " - Good to know this but again because this is personal income so i most likely will end up paying higher taxes since this will be on top of my base income. Are there any calculators out there that can help with testing some scenarios? that would be interesting  

Yep building is not going to be a one time thing but for now certainly can't think of multiple homes a year. Perhaps that will be the future but hard to say it without actually going thru the actual process and see if at all works out. 


Thanks for the info though and please keep it coming. It will b great if anyone with a similar experience can chime in. Thanks all!


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## Mortgage u/w (Feb 6, 2014)

rav1 said:


> " .. Now, even if you build a second unit and sell it, you'll be taxed at a personal level on 50% of the capital gain ... " - Good to know this but again because this is personal income so i most likely will end up paying higher taxes since this will be on top of my base income. Are there any calculators out there that can help with testing some scenarios? that would be interesting


Depending the profit, it may be beneficial to claim on a personal level. Especially if its a one time thing - you'll avoid the headache of managing a company paperwork. Would be best to discuss with an accountant. 

As for the build experience, I hope you have great contacts for sub-contracting, otherwise I would suggest hiring a reputable general contractor to manage your project.


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## rav1 (Dec 14, 2015)

Mortgage u/w said:


> Depending the profit, it may be beneficial to claim on a personal level. Especially if its a one time thing - you'll avoid the headache of managing a company paperwork. Would be best to discuss with an accountant.
> 
> As for the build experience, I hope you have great contacts for sub-contracting, otherwise I would suggest hiring a reputable general contractor to manage your project.


Yep, already on the lookout for an accountant who can advise on this matter and an efficient model to approach this.

I do have plenty of contacts within designers, trades etc. and ready to go through the grind.


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