Real Estate Quotes

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

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

Your after-tax rate of return must be greater than your after-tax cost of borrowing or the financial math won't add up in your favour. Based on everything you know about the history of your investment type and the best advice of the professional team you employ, ask yourself what the average and worst-case scenarios look like. If you can't live with the worst-case scenario, don't move ahead with the investment. Across Canada, real estate has returned on average 5.5 percent over the past thirty years. But perhaps you might be extremely unlucky and find yourself in a ten-year lull where the market returns only 3.5 percent. Keep this in mind (and stress-test for it) when deciding whether to borrow money to invest. [2017] - Calum Ross

Simply screen tenants by calling their prior landlords, checking their credit history to find out if they've missed many payments in the past, confirming their income, and having them fill out rental applications. Many landlords don't take these steps, which I suspect is where most real estate horror stories come from. [2017] - Calum Ross

Never borrow to invest unless you're a hundred percent certain you are insured against all realistically potential catastrophes. This is an important point, because different properties will have different insurance requirements. The type of property, neighbourhood, and renter profile will define what type of insurance you need. Find a great insurance agent connection and learn the basics of rental real estate insurance. [2017] - Calum Ross

It is vitally important to select a qualified mortgage professional who focuses on investment real estate and understands the investor's wish to use borrowed money to invest in multiple properties. Formal financial-planning training is also a critical component of being able to advise effectively. If they are competent enough to be a mortgage professional for an investor like you, he or she will start off by asking, "What's your goal?" [2017] - Calum Ross

There are four ways to profit from real estate. The first is mortgage pay-down. You can rely on your real estate investments to reliably pay down your mortgage. As the mortgage is paid down, your equity goes up. Second is cash flow. Once all of your property expenses have been paid, the money remaining is your cash flow. Third is appreciation. We have incredibly strong historical proof showing that the real estate market rises gently over time. Fourth is forced appreciation. Properties that are renovated to a certain modern standard earn more income. This could be cosmetic and, therefore, lead to higher-quality tenants desiring the property, or it could be structural and, therefore, change the use of the property (from one suite to two, for example). [2017] - Calum Ross

Multiplexes typically earn stronger cash flows, especially when they are purchased outside the downtown Toronto area. [2017] - Calum Ross

Renovations aren't a good fit for every investor or even most investors. Some investors, especially those later in their financial life cycle, would be dramatically better off purchasing a turnkey property - a property that's completely ready to rent, often with tenants already renting. [2017] - Calum Ross

In the worst-case scenario, you will want enough cash sitting in the bank to cover all the carrying costs of owning a real estate property for three to six months.  [2017] - Calum Ross

A good rule of thumb is to budge 10 percent of total income for property management, but it will depend on the property type and the area you live in. Ask your real estate agent about the correct numbers to budge for your property type and area. Also ask your real estate agent for property manager recommendations. A great agent will have trusted contacts in this area. [2017] - Calum Ross

Generally speaking, variable interest rate mortgages will save you money compared to fixed rate mortgages in the long run, but that at any given point in time you need to assess the risk-and-return trade-off of the two options. [2017] - Calum Ross

Always choose a real estate agent who is also invested; Always chooses a real estate agent with several years of experience (at least five to ten years in the business); Always get a recommendation before choosing a real estate agent. [2017] - Calum Ross