Real Estate Investing

Common rental property expenses include:

• Mortgage Interest
• Property Taxes
• Legal Fees
• Property Management Fees
• Professional Costs
• Repairs & Maintenance
• Strata Fees
• Insurances
• Advertising
• Depreciation
• Utilities if applicable (heat, water, gas)

• Legally you are required to claim your rental income come tax season.
• Most conventional lenders will require proof of rental income claimed on your taxes in order to use that income to qualify on your next purchase.
• When claiming rental income, remember you only pay taxes on the NET income (after expenses). Many investors owe little to no money come tax season, after writing off all property expenses (see below for more details).
• Unlike business income, we can use your rental properties GROSS income (per the lease agreement) to help maximize your qualifying power on your next rental property.

• Yes, investment properties can be acquired in a Holding Company. However, when securing mortgage financing, the lender will require a personal guarantee.
• Tax and liability strategies are the two big advantages of corporate real estate holdings, which is why many savvy investors consider this option when purchasing.

• Capital gains tax is a government tax on the profits realized on the sale of an appreciating asset.
• In real estate today, if you sell an investment property for MORE than your acquisition cost, you will realize that capital gain and be taxed accordingly.
• In Canada, the capital gains tax is 50% on HALF of any profits gained at the time of sale.
• Remember, capital gains tax is only payable on the appreciating value, and not the full sale price.
• Corporate tax rates will differ if your investment is held in a company name.

Here are twelve touch points to consider:

• Confirm your numbers - projected rents vs expenses. Reanalyze!
• Review comparables in your area to pinpoint a final price.
• Review the sales history of the home you are planning to purchase – this report can tell you a story about the property and how motivated the sellers are.
• Get your mortgage approved and your property appraisal done!
• Inform your property manager.
• Get your home insurance policy quote in place.
• Review the current tenancy schedules - if applicable.
• Call the city – confirm no issues from their end. i.e., illegal suites.
• Confirm property conditions and any updates required. For example: Hot water tank, HVAC, roof, plumbing, electrical, cosmetic work, etc..
• Review all documents including purchase, strata, title, disclosures, and more.
• Inform your legal team of your new purchase.
• Conduct your home inspection – confirm no deficiencies.

Final review before subject removal – GUT CHECK!

• The magic number is 5 properties (1 primary & 4 rental units)
• While most lending institutions limit borrowers to five total properties, there are exceptions.
• If your plan is to own 5 or more properties, there are strategies you can implement that will help you maintain your qualifications from one rental property to the next. Reach out to our team to learn more.
• On a case-by-case basis, there are commercial financing options available for those larger portfolios of 6 or more properties.

If you are buying a property for the purpose of an investment, 20% will be the minimum required down payment.

If you are buying a property for the purpose occupying that home, a minimum of 5% will be the minimum required down payment.

Let’s break down a few common sources of down payment.

• Savings - This strategy often takes the longest to accumulate.
• HELOC - A home equity line of credit is a common source that many homeowners utilize to invest in real estate. In this case, the interest paid is tax deductible.
• Equity - When done right, homeowners can leverage their built-up equity for the purpose of buying assets like real estate.
• Joint Venture - A JV partnership works great when one party has the down payment, and the other party has the credit and income to help qualify.
• Turn your primary into the rental - This strategy works well for those homeowners who want a rental property but have less than 20% down. Remember an owner-occupied purchase only requires 5% down.

To embark on your real estate investment journey, start by scheduling a consultation with Boychuk Mortgage Group's real estate financing experts. During the consultation, our team will assess your investment goals, evaluate your financial readiness, and discuss available financing options tailored to your needs. We will guide you through the process of acquiring your investment property, from securing financing to navigating the complexities of real estate transactions. Our goal is to provide you with the knowledge, resources, and support necessary to make informed investment decisions and achieve your real estate investment objectives.

Real estate investment opportunities are diverse and include residential homes, condominiums, multi-family properties (such as duplexes and apartment buildings), commercial buildings (like office spaces and retail centres), vacant land for development, and industrial properties. Each type of property offers different potential returns and investment strategies, catering to various investor preferences and financial goals.

Financing options for real estate investments are tailored to meet specific investor needs and the type of property being purchased. Traditional financing includes mortgages provided by banks or credit unions, which require a down payment typically ranging from 20% to 25% for investment properties. Alternative financing options such as private lenders or specialised investment property loans may offer more flexible terms and higher leverage, depending on the investor's financial situation and risk tolerance.

Real estate investing involves various risks that investors should consider. Market fluctuations can impact property values and rental income, potentially affecting investment returns. Property vacancies and unexpected maintenance costs are common risks that can disrupt cash flow. Regulatory changes, zoning restrictions, and economic downturns may also influence property values and rental demand. Mitigating these risks requires thorough research, proper financial planning, and a diversified investment strategy.

Real estate investing can play a crucial role in retirement planning by providing steady rental income and potential property appreciation over the long term. Rental income from investment properties can supplement retirement savings and provide a reliable source of passive income during retirement. Property appreciation allows investors to build equity, which can be leveraged for future investments or used to fund retirement expenses. Including real estate in a diversified retirement portfolio can enhance financial stability and wealth accumulation over time.

Investors in real estate may benefit from various tax deductions that can reduce taxable income and increase cash flow. Deductions commonly include mortgage interest payments, property taxes, operating expenses related to property management, maintenance, repairs, and depreciation. Tax laws and deductions can vary based on the investor's jurisdiction, property type, and income level. It's advisable for investors to consult with a tax professional or accountant to understand their specific tax obligations and maximise available deductions.