Flipping or renting: What makes more sense in Toronto’s market?

Recently, a client asked me whether they should buy a fixer-upper in Toronto to flip for a quick profit or renovate it and keep it as a rental property. It’s a question I hear often, and it reflects the heart of today’s housing market.

Initially, flipping seems very appealing: buy low, renovate quickly, and sell for a profit. It’s a storyline that’s popular for TV shows and casual chats at gatherings. However, in reality (especially in Toronto’s current market) the numbers tell a different story.

The flipping mirage

Flipping is most effective when you find a property deeply discounted, manage renovations carefully, and sell in a hot market where buyers are eager to pay top dollar for move-in-ready homes. Those conditions used to exist in Toronto years ago.

Profits from flipping properties across Canada are at their lowest in 17 years. Renovation costs are rising due to tariffs on materials and increased labour expenses. The typical flip lasts about five to six months, during which you’ll be paying property taxes, insurance, utilities, and financing costs. Moreover, the final expenses can be significant: in Toronto, closing costs, realtor commissions, and legal fees can total thousands before you see any profit.

Even when the numbers look good on paper, taxes often tell a different story. In Canada, profits from flipping are usually considered business income, which means you’re taxed at your full personal rate, not the lower capital gains rate that long-term investors benefit from. This alone can cut into profits more than many first-time flippers expect.

While flipping still works in theory, in practice, a surprise (such as an overrun in construction costs, a slower resale, or a dip in buyer demand) can wipe out your margins.

The case for renting

Now, let’s explore the alternative: renovating and renting.

Instead of depending on a quick resale, you prepare the property to be rental-ready, find tenants, and let time work in your favour. Each month, you earn rental income. Even in Toronto, where rents have slightly dropped in some areas, vacancy rates stay low (about 2.3% in purpose-built rentals) a sign of ongoing demand.

Rentals provide three long-term advantages:

• Appreciation – Toronto real estate has shown resilience over time. Although values fluctuate annually, they tend to grow over decades. A modest 3% yearly increase on an $800,000 property adds an extra $24,000 in value each year, plus your rental income.
• Tax advantages – Unlike flipping, where profits are taxed as business income, holding rental property lets you deduct expenses, such as maintenance, property management, mortgage interest, and depreciation, thus lowering your taxable income.
• Flexibility – A rental doesn’t pressure you into the “now or never” approach of a flip. If the market softens, you can keep renting until conditions improve.

If you’re buying a fixer-upper to flip, don’t pay more than 70% of the after-repair value. If you plan to renovate and rent, expect about half of your rental income to cover expenses like property taxes, insurance, maintenance, and vacancies. If the deal still offers positive cash flow after that, you’re in a safer position. If you initially intended to flip but the numbers don’t add up, can you consider renting it out instead? Flexibility is a key safety net for investors.

Toronto isn’t a place where deep discounts on fixer-uppers make flipping more profitable. Here, high purchase prices, rising renovation costs, and transaction fees greatly cut into profits. A flip might yield small gains, but one mistake can turn them into losses.

Housing affordability issues mean more Canadians are renting longer, which continues to pressure the rental market. Even with slower rent growth in 2025, the long-term fundamentals remain strong.

Flipping is like rolling the dice; sometimes you might come out ahead, but currently, the odds in Toronto are against you. Renting, however, is a long-term strategy. It won’t make you wealthy overnight, but it offers stability, tax advantages, and appreciation that grows over time.

For investors aiming for lower risk and long-term growth, renovating and renting is the safer choice in today’s Toronto market.