Solid Reasons for Investing in Real Estate -With low interest rates being offered on many savings products (bonds, savings accounts, term investments, etc.) and the volatility of the stock market, traditional investment vehicles may not be sufficient to save for your long term goals. Some investors are now taking comfort in the diversification offered by real estate investments.
Here are just a few of the advantages of investing in Real Estate.
Stock Market Volatility: As we’ve seen in the last several years the stock market is extremely volatile and unpredictable.
Return On Investment: Let a tenant help you build equity. Having a tenant pay your rent may help offset the cost of the mortgage while still enabling you to build equity on your investment.
Long Term Equity: Investing in Real Estate is often a good way to build long term equity.
Lower more manageable risk: Depending on the type of property you purchase. Real Estate may offer you a more manageable risk then some other investment vehicles.
Supplemental Income: Investing in Real Estate may enable you to supplement your income for large expenses like education of your children or savings for your own retirement.
Diversify, Diversify, Diversify: Good financial planning involves using many financial products. Real Estate may be a good means of diversifying your portfolio.
Low Barriers to Market Entry: Owning a small business can require hundreds of thousands of dollars in start up costs and personal assets. An investment property may require as little as 15% down on the value of the house. This may satisfy your desire to become self- employed.
Robust Rental Market: Vancouver Island is one of the most desirable places to live in Canada and has a very competitive rental market with less than 5% vacancies. (Based on a recent Canadian Mortgage and Housing Corporation’s quarterly review)
Help reduce your taxes: Claiming property related expenses and the interest on the mortgages may help offset the taxes owned on your regular source of income.
However, as with any investment, it is important to take all the factors (both positive and negative) into consideration when making your decision. Speak with knowledgeable, trusted and experienced real estate professionals like Harry Helfrich & Bernie Podlubny to discuss investing in real estate. Call us today at 1-800-779-4966
Here are a few more articles on the advantages of investing in Real Estate.
Don’t let your children be trapped into paying rent to a landlord. In today’s economic climate it costs almost the same to own as it does to rent. Often the only difference is having a sufficient down payment.
Pennies add up. Even something as reasonable as $700 a month is the equivalent to $8400 for the year. If they pay that for a 3 year period (assuming no rental increases) you’re looking at $25,200 being handed over to a total stranger. Imagine what they could have done with that money.
Here are some simple and practical ways you can help them save for a down payment;
Instead of buying a car as a graduation gift. When they are ready to move out either provide them with a down payment or give them the down payment as a ‘loan’. Often first time home buyers can purchase a home with as little as 5% down.
Let them stay at home longer. If they can live at home for a few years while working full time they should be able to save up enough for a down payment.
Charge them rent. If your children have a part time job through high school then collect one or two hundred dollars per month as rent. Put the money into a special savings account and give it to them as a gift when they are ready to leave home. You can even top that up to make it an even bigger gift.
Financial stability is just one of many factors that can lead to a happy and rewarding life. Helping with a down payment is one step you can take to lead them in that direction.
The costs of renting/living in residence and tuition for students can be overwhelming these days. Investing in real estate to help offset some of the expenses associated with post secondary education is something you may wish to consider. It may help out both you and your son or daughter.
Some factors to take into consideration:
Canada Mortgage and Housing Corporation, CMHC in recent years changed their policy so that you can now borrow up to 90% of appraised value of your principal residence. (Less the outstanding mortgage). These new funds can be used for a variety of purposes such as debt consolidation, investing or as funds for a down payment for purchasing an investment property that your son or daughter could live in close to their university or college.
The refinancing of your home could be done either with your current institution or a new mortgage could be looked at. A comparison would need to be done to see if refinancing with your current institution or taking advantage of the lowest mortgage rates in a long time, currently as low as 5.1%* is more beneficial to you. The advantages could be twofold, saving interest on your current mortgage, which could help pay down your principal faster and providing a down payment for the new investment property, which theoretically could be purchased with little or no cash investment from your portfolio. Depending of course on the size of funds available from your existing mortgage.
A second mortgage or secured line of credit against your principal residence would also be an option. Another factor to take into consideration is that if the property being considered was a duplex or a triplex then the additional rents you receive from the other units may cover your mortgage payments. The interest rate for buying an investment property is still the same as with a new residence. Interest rates are currently as low 5.1%* for 5 years.
However, each individual situation is different so you need to consider all available options and choose the one that best fits your personal situation. It is also important to speak to qualified mortgage professionals when making your decision.
*Rates are accurate at time of printing.
- Did you Know…
Did you know that you can give a cash gift to an adult child and there are no income tax implications.
For instance, the child receives the gift tax-free and can use the gift as a down payment on a home for instance. This can prove tax beneficial to you if you otherwise have the cash invested and are paying tax on the income. Your rate of return after tax may be quite low.
If you do not personally need the cash or the investment income to support your lifestyle, it could perhaps be better used to assist with buying a home.
- The perfect dorm gift.. No dorm at all.
In a few years they’ll be packing their bags to go off to university. Why not consider purchasing a rental property in the vicinity of their new school? Have their roommates pay rent which you can use towards the mortgage. Depending on the cash flow of the property your child should be able to live rent free for their university career.
An added bonus is that after they are done, you can either sell the property or continue to keep it for investment purposes.
If your child is going to school here locally or anywhere in North America and you are interested in purchasing a home for them. Let us help. We have an extensive network of realtors throughout North America that we can put you in touch with.
- Investing in Real Estate Wins Top Grades
With the ever increasing cost of tuition, many parents are worried about being able to save enough for their children’s education. In the last decade alone, tuition has increased dramatically depending on the program. Carrying this burden has not been easy. A recent survey by the Canada Millennium Scholarship Foundation discovered that currently more than 70 per cent of post-secondary students finance their education through debt. This trend will likely continue in the future.
So how do I save for my children’s education?
With low to negligible interest rates being offered on many savings products (bonds, savings accounts, term investments, etc) and the volatility of the stock market, traditional investment vehicles may not be sufficient to save for your children’s education. Some investors are now taking comfort in the diversification offered by real estate investments.
Owning an investment property may enable you to save money for your children’s education and at the same time, act as a forced savings tool. All the while building equity.
Consider this example:
Mary Jane and her husband Bob purchase an investment property (condo) for $145,000 and put 25 per cent down. They rent it out for $900 a month. While they have to put in an additional $75 a month for the first few years, by the time their two-year-old Carson is old enough to go to university, they will have built a sizeable equity in their property in addition to paying most of it off. At that point, they can do one of three things; sell it and use the proceeds to pay for Carson’s schooling, continue to rent it out and have the rent subsidize his living expenses while in school or refinance the mortgage and use the built in equity to finance his school.
Investing in real estate may be something to seriously look at as a means of diversifying your investment portfolio and for supplementing your income for big expenses like your children’s education. However, as with any investment, it is important to take all the factors (both positive and negative) into consideration when making your decision. Speak with a knowledgeable, trusted and experienced real estate professional like Harry Helfrich & Bernie Podlubny to discuss investing in real estate. Call us today at 1-800-779-4966 for more information
Dear Coast Realty,
We would like to thank you for the very
attentive service which we have received from your agents Harry and
Bernie. At all times, nothing was to much trouble for them while we
were searching for a suitable property. They were always very friendly
and maintained a cheerful countenance as well as being very
knowlegeable about the available properties in the Nanaimo area. It was
a pleasure to have them as our agents, because of this we also
entrusted the listing of our building lot to them. If you have a
salesman of the month or year award, we would like to nominate Harry
and Bernie.