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Wednesday, May 25, 2011
Want to Become a Landlord?
Categories:Real Estate Investing
Want to Become a Landlord?
Fixing up a basement suite or buying a duplex to rent out may seem like an easy way for your clients to make money-but it’s harder to be a successful landlord than you think.
1. Is it a money-maker?
If you’re looking to buy a rental property, first ask yourself two questions: How much will it cost me? And what will it rent for? Get a realistic assessment of current rental rates and don’t skimp when estimating expenses. They include the mortgage, maintenance, insurance and taxes. If you find expenses will consume all your rental income, forget it. "I wouldn’t settle for a property where I’m just paying down the mortgage," says David Southen, who owns over 100 rental units in Ontario. "I need to get paid now."
2. Get your legal issues in order
Too many small landlords consider themselves passive investors rather than business owners, says Harry Fine, president of Landlord Solutions paralegal service in Toronto. "You need to understand the law, and it can be very complex," Fine says. Prospective landlords must take the time to understand all their legal obligations, ensure the property is legal to rent and prepare a solid lease.
3. Find the right tenants
First the good news. Advertising for tenants is getting cheaper. Southen says he’s stopped paying for newspaper ads and now uses Kijiji.com exclusively. But three checks are still crucial for every potential tenant: a credit report, employment verification and a call to previous landlords. Ideally, you should avoid calling current landlords, as they might stretch the truth to rid themselves of a difficult renter. "Anyone who is not making all three checks is out of their mind," says Southen.
4. Keep your tenants happy
Southen budgets $800 a year in routine maintenance for every unit he owns. And when something breaks, he sends someone to repair it ASAP. "You need to be responsive, because if a good tenant moves out, it costs you a lot of time and money to replace them." Cutting down on tenant turnover is his secret weapon for a successful career as a landlord. Whenever a unit becomes vacant, he always re-paints and often re-carpets. "If you keep the place maintained, you will get a better quality of tenant."
5. Take prompt action on bad tenants
For small landlords with one or two units, a single bad tenant can be devastating. Fine says a quick and aggressive response is necessary to limit the damage if a tenant stops paying rent or damages the property. "You can’t wait three months and hope the problem goes away," he says. While tenancy law varies across Canada, some savvy tenants know how to game the system for extended rent-free stays. This can mean substantial extra expenses for landlords, as well as lost income.
By Peter Shawn Taylor | From MoneySense Magazine
Thursday, April 7, 2011
Real estate: A ‘Secret’ Tax Shelter
We at MyHomeAgent have been speaking for years about the benefits of Real Estate Investing. Here is an often overlooked benefit. Step up your game Calgary and Invest NOW before the interest rates and prices rise.
A Great Article By Jason Heath as a Special to the Financial Post
TFSAs have been a welcome addition to the tax shelter landscape in Canada, but they leave something to be desired for those with substantial assets and maxed out RRSP and TFSA room.
Film limited partnerships have disappeared, charitable donation tax shelters were flawed from the start and the investment tax credit for flow-through shares may or may not be extended in the next budget.
Real estate is often overlooked in the quest for tax reduction and deferral, let alone income generation and inflation protection. If real estate is all of these things, why doesn’t everyone own a rental property? The answer is simple – money.
It’s not that investors don’t have the money to get into the rental property market, because this can be easily accomplished with leverage and minimal monthly carrying costs. The problem is there is simply no money to be made by financial professionals when it comes to rental real estate. The result is that rental real estate is a secret tax shelter that few people ever consider.
Investment advisors sell stocks, bonds and mutual funds. Insurance agents sell insurance policies. Accountants sell tax preparation services. Real estate agents sell real estate, but they tend to sell real estate from a vendor to a purchaser to be used solely as a principle residence.
So rental real estate ends up being a golden goose, elusive, yet attractive.
According to Harvard professor Niall Ferguson in The Ascent of Money, “The original property game we know today as Monopoly was actually invented back in 1903 to expose the unfairness of a social system where a small minority of landlords [took advantage of] the majority of tenants.
“What the game of Monopoly tells us, contrary to its inventor’s intentions, is that it’s smart to own property.”
First, a lesson in rental real estate taxation. Rental income is taxable and rental expenses, including mortgage or line of credit interest, are tax-deductible. In many cases, if a property is financed, it will run at a loss for tax purposes creating a tax deduction against all other sources of income and therefore, a tax refund. In the meantime, real estate values grow tax-deferred until an eventual sale. Even if a property runs at positive cash flow for tax purposes, depreciation can be claimed to wipe out some or all of the taxable income inclusion.
Rental real estate has been described by some as the equivalent of a super-charged RRSP. What is a traditional RRSP? It’s a tax-deferred savings vehicle; contributions are tax-deductible; it provides a future income stream; and it’s an investment asset. Rental real estate incorporates all of these features, plus there’s no pre-determined maximum tax deduction limit like with RRSPs; withdrawals aren’t forced at age 71 like with RRIFs; contributions can be financed and the interest can be deducted, unlike RRSP loans; and the taxes paid on selling a rental property are at the 50% capital gains tax rate, unlike RRSP withdrawals which are fully taxable.
The Harvard and Yale endowment funds have more than 50% of their assets invested in non-traditional asset classes, like real estate. The Ontario Teacher’s Pension Plan, the largest single-profession pension plan in Canada, has 18% of their pension assets invested in real estate. Maybe Harvard, Yale and the OTTP know something the mainstream investment community doesn’t know.
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Tuesday, January 18, 2011
When is the Best Time to Sell?
Categories:Buy a House In Calgary,Calgary Market Trends,Calgary Real Estate,Real Estate Investing,Renovation,Sell your Home in Calgary
14,500 transaction this year as a forecast averages out to 1200 sales per month. So would you rather sell your house when there is 6,000 listings or when there is 12,000 listings. Of course, the time to do it is NOW before the market is flooded with competition. And remember the mortgage rules change on March 18, 2011 so there will be LESS BUYERS for the same product in the summer.
Timing is everything and Selling Now is a better option than waiting for the Summer.
CALGARY - The Calgary Real Estate Board is forecasting a slow recovery for the market this year, but improved sales compared with 2010.
In its annual forecast released Tuesday, the board said Calgary's housing inventory levels are expected to stabilize, resulting in an eventual return to a more balanced and sustainable housing market.
It forecasts single-family home sales to increase by 19.9 per cent this year to 14,500 transactions while the average MLS sale price is predicted to rise 4.1 per cent to $480,000.
Read more: http://www.calgaryherald.com/business/Slow+recovery+forecast+Calgary+real+estate/4125861/story.html#ixzz1BS53CQcx
Monday, January 17, 2011
Ottawa toughens mortgage rules
Categories:Buy a House In Calgary,Calgary Buyers,Calgary Economy,Calgary Home Buying,Calgary Market Trends,Calgary Real Estate,Real Estate Investing,Sell your Home in Calgary
Ottawa toughens mortgage rules
OTTAWA -- Finance Minister Jim Flaherty is cracking down on Canadians' ability to qualify for a mortgage, in the government's latest attempt to rein in consumer debt.
Flaherty announced Monday the government is reducing the maximum amortization period for government-backed mortgages to 30 years from 35 years. The change will affect mortgages with loan-to-value ratios over 80 per cent.
Canadians will only be able to borrow up to 85 per cent of the value of their homes, down from 90 per cent.
In addition, the government is withdrawing backing for lines of credit secured by people's homes.
Flaherty said the changes are designed to prevent the kind of housing bubbles that developed in other countries, most notably in the United States, where the collapse of the subprime mortgage market triggered the global financial crisis.
Again: the TIME TO BUY IS NOW. Don't get surprised by this and have your hopes come crashing down in a few months. The government is giving ample warning.
Monday, December 27, 2010
Building Your Real Estate Investment Team
Whether you like it or not, you can’t do it all by yourself. Investing in real estate requires many different professionals. There are Realtors, appraisers, inspectors, builders, renovators, mortgage companies, banks, property managers, attorneys, partners, accountants, sign companies, printing companies and yes even mentors, buyers, sellers and tenants. In business, you are only as good as your weakest link. I want to suggest that you choose your team carefully. You may even want to go as far as interviewing your team players.
After all, this is a business and the dollar amounts can be substantial so you want to make sure that your team members have the same morals, ethics, business philosophy and personality as you. This is not to say that you will not make some mistakes and-or changes along the way, but when you start out with a list of the qualities that you are looking for in your team, it makes the decision process much easier. Yes I did say qualities and not experience or education. It’s easy to find someone who knows the business or has experience but it can be a challenge to find the right qualities and personality in the person you are looking for.
I would start my search by seeking a referral from someone who is already in the business and is successful. Make sure you know the person you are seeking the referral from well enough to know that you will be well received when you contact whomever they referred. Notice that I indicated that you seek a referral from someone who is not only in the business but is “successful”.
It doesn’t do any good to contact a banker for a line of credit when you have been referred by someone the banker just turned down, nor does it look good to contact a Realtor referred from someone who just backed out of the last deal they had under contract. I think it is only appropriate to note here that if you are making a referral to someone who is building their team, make sure you know a little about this person also. It doesn’t help you by referring someone to your banker who just got out of bankruptcy and has a history of shady deals.
Once you establish your team players, you should be loyal to them. Let me give you an example. Who are you going to call when you find a listing online or another Realtor’s listing while driving the neighbourhood? Most people would say I call the listing agent. Let me suggest you call your team player and let them go to work for you.
If you call the listing agent and buy the house, it may be the only sale you give that Realtor this year. By calling your Realtor, that closed XX transactions for you last year, they will go to bat for you to get you the price and terms that they already know you are looking for. Not to mention the fact that you will be the one they call when they find a deal that has to be sold fast.
At MyHomeAgent we specialize in investment analysis, purchases and operations. Put us to work for you and we will work together as part of your successful team.
#103, 11012 Macleod Trail South, Calgary, AB, T2J 6A5
Cell: 403-852-6583, Email: denis@MyHomeAgent.ca
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