Good To Know: Tips for First-Time Real Estate Investors
Investing in real estate can be extremely beneficial to your financial portfolio. In fact, some people make a bonafide career of it. But there’s a first time for everything. So, if you’re a rookie, here are a few crucial tips (organized alphabetically) to keep in mind.
Be mindful of flipping. In other words, consider how quickly you buy and sell your investment properties. The Canada Revenue Agency (CRA) could view such activity as business income, which means you’ll be paying tax on ANY profit investment yields.
First-hand experience counts. Consider seeking out a realtor who personally invests in real estate on their own part. No better way to navigate what could otherwise be a potential minefield.
Know you can walk away. If the deal isn’t right, you aren’t bound to it… no matter how much you might have potentially invested in it, personally or financially.
Maintain proper income and expense records. For goodness sake, do NOT mix these in with your personal finances. Because you’ll have to file a year-end tax return and the CRA will be all over every cent, and the CRA is neither forgetful nor forgiving.
Pay the mortgage broker a visit. Whether the bank or an independent, they’ll advise a responsible amount to borrow.
Positive cash flow! Keep this top of mind, because if you’re investing in a rental property, then the rent you get from your tenants needs to cover your monthly mortgage payments, maintenance fees and utilities, annual property taxes, etc.
See an accountant—or lawyer. It’s always worth exploring options in regards to how you plan to take ownership of the investment property. After all, benefits exist in taking title in the name of a limited company. That being said, you’d be required to pony up about a thousand bucks a year in incorporation fees, plus need to file separate tax return.
Stay in it for the long-term. It is better you buy an investment property for an extended period, rent it out, then utilize your positive cash flow to scale back the amount of your owing mortgage, and therefore creating equity in your investment property.
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