Quotations by Calum Ross

Major city newspapers tend to publish a comparison of the prevailing mortgage rates by institution in the real estate section of the weekend newspaper. This will save you a lot of research time. Also check with mortgage brokers in your community. They frequently publish a list of current comparative rates and will send a copy to you free upon request. [2017] - Calum Ross

If you are buying a condominium as your principal residence, you generally don't pay any fees, other than the appraisal fee to the mortgage broker. [2017] - Calum Ross

There are many factors you have to decide on before finalizing your mortgage decision. The key factors are amortization, term of the mortgage, open or closed mortgage, interest rate, payment schedules, prepayment privilege, and assumability. [2017] - Calum Ross

There are many payment schedule options available in the marketplace, including weekly, biweekly (every two weeks), monthly, semi-annually, annually, and other variations. Generally, the more frequently you make payments, the lower the amount of interest that you will be paying. [2017] - Calum Ross

You may have a mortgage which, though called a closed mortgage, is in fact partly open and partly closed, permitting prepayments at certain stages and in a certain manner, but not at other times. [2017] - Calum Ross

There is a lingering societal belief that interest rates have to go up, but the reality is that they will stay low for a very long time. Interest rates will be kept low so long as debt levels remain historically high. Even when interest rates aren't historically low, it is almost always a good idea to borrow to invest. [2017] - Calum Ross

A HELOC (home equity line of credit) allows a homeowner with significant equity access to that dormant equity. The homeowner can do what they want with the money. The most financially literate and sophisticated people have always borrowed against home equity to invest. [2017] - Calum Ross

If you're investing in major markets, there is no more space to build at the same time as there is a net migration into the cities. Simple supply and demand stipulates that prices will remain robust (taking into account the inevitable corrections) for the foreseeable future. [2017] - Calum Ross

If you choose to manage your own properties, it also means maintaining a book of contacts, such as a plumber, an electrician, a painter, and a flooring installer. If you hire a property manager, he or she will maintain that entire Rolodex of contacts on your behalf, plus handle a thousand small problems you truly don't want to touch. Much property management work is low-wage work, so you will effectively be losing money by spending your time here. [2017] - Calum Ross

When selecting a financial planner, you want someone with at least seven years of experience. If they've been in the business for at least seven years, it means they've likely seen at least one full market cycle. [2017] - Calum Ross

Never select a financial planner who is paid by commission for anything to do with stocks, bonds, or mutual funds. Great financial planners only charge their clients a fee for money management. If their clients earn a strong return after paying their fees and they keep coming back, it means they're happy. In today's age, there is nothing in the client's best interest that comes out of commissions. Every stock, bond, or mutual fund product available only by commission has an alternative that a fee-based financial planner would have access to. It's only difficult to avoid commission-based sales on insurance and private real estate purchases. [2017] - Calum Ross

It doesn't make sense to go to one person for tax preparation, another for investment management, and another for estate planning. It should all be handled in-house. [2017] - Calum Ross

All investments (not just those in real estate) using borrowed money create a tax deduction. In Ontario, for example, you are at a marginal tax rate of over 33 percent by the time you earn over $45,000 per year. This means that if you borrow at 10 percent, then your after-tax cost of borrowing is less than 7 percent (10 percent x (1-0.33) = 6.7 percent). [2017] - Calum Ross

Articles about personal fiance often trumpet the better long-term returns attained in the stock market than in the real estate market. One such article stated that real estate earned 5.5 percent annually over a thirty-year period, while the benchmark TSX earned 8.5 percent. I don't dispute the numbers, but articles of this type usually leave out the fact that real estate allows you to invest five times more money. So rather than earning 5.5 percent over thirty years, the smart real estate investor would have earned 27.5 percent (5.5 x 5). [2017] - Calum Ross

In the United States, mortgage interest is tax deductible (even on your personal-use home). Canadian tax law doesn't allow for this. However, interest paid on money borrowed to invest can be deducted off your tax bill (interest paid on money borrowed for other reasons cannot). You'll never be able to deduct interest on the portion of the mortgage that is used to purchase your principal residence, but you can borrow additional funds against your home for the purpose of investing, thereby creating a tax-deductible interest expense. [2017] - Calum Ross

Borrowing to invest in stable, positive-cash-flowing real estate or even high-quality blue-chip dividend-paying stocks, when well executed, is the lowest risk measure you can take to dramatically improve your retirement standard of living and prospects. Dividend-producing stocks and other investment returns are nowhere near as carved-in-stone as real estate's are. You have a high degree of control over a private real estate investment, whereas you have no control over a stock investment. [2017] - Calum Ross

You can use debt capital pulled from your own home (or maybe an existing rental property) to fund the down payment for a rental property. You can do a leveraged loan against a stock portfolio as well, but it's not as simple as with real estate. Leveraged loans against marketable real estate are among the easiest to qualify for, have the lowest interest rates and have the most options available. Eighty percent LTV (loan-to-value) loans are the norm in real estate today. I doubt you will be able to find another asset class in which you can borrow such a high percentage of the total value and still get such preferential rates and conditions. [2017] - Calum Ross

In the Greater Toronto Area, properties within the city of Toronto generally appreciate faster than properties in some of the outlying areas, but the outlying areas can often have stronger cash flow. (Keep in mind that cash flow is typically at the expense of appreciation, which is a more tax-efficient builder of wealth.) [2017] - Calum Ross

The key is to find a market where rents are sufficiently strong while at the same time having a low-enough purchase price. There is a sweet spot to be found in the outlying areas of most major centres. Keep in mind though that outlying areas tend to have less diversified economic bases than major cities, so while the cash flow may be greater, it may not be as stable. You would be very hard pressed to find a property with such strong cash flows in major cities, but you can still find positive cash flow. Finding great cash-flowing deals can take a bit of time. You have to do the research and be patient for the right deal, and you will need a few connections, but it can be done. Working with a world-class real estate agent makes searching and negotiating far easier. [2017] - Calum Ross

I firmly believe that interest rates will stay low for the foreseeable future, but I don't do my long-term financial projections based on those low numbers. I calculate a worst-case scenario, where interest rates rise dramatically (using a 3 percent stress test). Only if my investments will still cover the cost of borrowing, after accounting for a sharp rise in rates, will I make an investment with borrowed funds. Remember that it's actually the after-tax cost of borrowing that matters. Consider this: if you're in the 50 percent tax bracket, even a rise of interest rates to 6 percent would be equivalent to an after-tax cost of borrowing of 3 percent because you can deduct half of your interest expense in taxes. [2017] - Calum Ross