{"id":140,"date":"2019-07-26T15:36:58","date_gmt":"2019-07-26T15:36:58","guid":{"rendered":"http:\/\/taxpaws.com\/?p=140"},"modified":"2019-07-26T15:36:58","modified_gmt":"2019-07-26T15:36:58","slug":"real-estate-is-it-really-the-best-investment","status":"publish","type":"post","link":"https:\/\/taxpaws.com\/index.php\/2019\/07\/26\/real-estate-is-it-really-the-best-investment\/","title":{"rendered":"Real Estate: Is It Really The Best Investment?"},"content":{"rendered":"\n

REAL ESTATE: IS IT REALLY THE BEST\nINVESTMENT?<\/p>\n\n\n\n

One of the greatest investments of all\ntime has appeared to be real estate development and other activities\nin real estate. It can be argued, however that real estate is just\nlike any other investment such as stocks and mutual funds. When\nlooking at the idea of investing in real estate \u2013 people often like\nto do it as they collect passive income and it requires very little\nwork \u2013 or it does on the surface anyways.<\/p>\n\n\n\n

For a passive investment \u2013 real\nestate does not appear to be so passive as one must find renters,\nmaintain the property or find people to maintain the property and\ncollect the rent or have a management company do it. Yes someone else\nis paying for your investment so the gain is on the value of the\nproperty itself once it\u2019s disposed of. It does have a tax advantage\nwhen you go to sell the property as it falls under capital gains\n(assuming that you are not in the business of buying, fixing, and\nthan selling properties). The rent collected over the long term is\ntreated the same as interest or employment income and is taxed at\nyour marginal tax rate \u2013 the one exception is you do not have to\npay CPP on it. Rental properties are also good as they are considered\nincome for RRSP purposes. \n<\/p>\n\n\n\n

I have heard from may sources that real\nestate can be a massive headache, especially when it comes to the\napartment style condo. In the current economy, people are holding on\nto them as they cannot get their money out and are forced to pay for\nspecial assessments where they often have to come up with extra money\nout of the blue \u2013 on top of the condo fees which may or may not be\ncovered by the tenant. Yes, the special assessments can be deducted\nbut is it really worth it to pay for example $3 000.00 to get $750.00\nback assuming a 25% tax bracket or would you have been better of to\nlet the $2250.00 grow in a tax free savings account or let the full\n$3000.00 grow in an RRSP since RRSP\u2019s are bought with whole\ndollars, not after tax dollars. I guess that it depends on how much\nthe property value is going to grow versus the additional money that\nmay have to be put into it. \n<\/p>\n\n\n\n

One of the tales that I often hear\nabout is what I refer to as the \u201cDevil Tenant\u201d, the tenant that\ndoes not take good care of your investment and at times even destroys\nit. For example, I know of a poor soul who bought an apartment style\ncondo for around $70 000.00 and it was good in the beginning as real\nestate was booming at the time and the value grew to around $140\n000.00 \u2013 this can be considered a good investment as it looks like\nthe gentleman doubled his money -who wouldn\u2019t like that. Enter the\n\u201cDevil Tenant\u201d, he took a hammer to the sink and toilet and\nflooded the entire unit and the unit underneath it. The individual\nhad to pay around $40 000.00 to make the unit available for rent or\nsaleable once again. Now, this is an extreme case but it is just one\nexample of why real estate isn\u2019t risk free either. Yes, this\nindividual got to expense $40 000.00 on his tax return as it was\naccepted by the CRA that there was no betterment since a flooded\nproperty is rendered uninhabitable and as a result could not be\nrented \u2013 or sold in that state. \n<\/p>\n\n\n\n

While real estate can look like a\npromising investment, I believe it is like everything else \u2013 you\nmust do your due diligence and research to see if there is an\nopportunity for long term growth. I believe, ultimately there could\nbe good growth if you are able to get a tenant to pay your mortgage\nwithout having to put too much personal money in as you get your\nmoney out of it once the property is sold plus the growth \u2013 the\nmore money you have to put in, the less growth.<\/p>\n\n\n\n

I am always amazed by the people who\ntell me that real estate is good for your taxes and that you can get\nexcellent money out of it with very little risk. I\u2019m sure it\u2019s\ntrue sometimes but there are so many factors that must be considered\nwhen getting involved such as the economy, market conditions,\nliquidity, mortgage rates just to name a few \u2013 along with an\nultimate factor that can be somewhat controlled, whether or not you\nget the \u201cdevil tenant\u201d, in my opinion the number one obstacle to\nthe creation of wealth using real estate.<\/p>\n\n\n\n

What are your thoughts? is real estate\nstill the be all and end all of investments or is it just like\ninvesting in everything else.<\/p>\n\n\n\n

In my next post, I\u2019ll talk about\nanother investment \u2013 starting the small business.<\/p>\n<\/body>","protected":false},"excerpt":{"rendered":"