Use Your Home Equity to Invest in Real Estate

Thanks to the appreciation in real estate over the last 5 years, owning an investment property may be closer to reality then you think.

This may be common knowledge to some potential investors, but there are a number of key benefits to owning an investment property.  To name a few, you can a) create a predictable monthly cash flow b) enjoy capital appreciation on the entire value of the home and not only on your initial investment c) have someone else pay down your mortgage for you d) enjoy the tax deferral of your capital appreciation over the long run while taking advantage of tax write offs each year. When compared to a retirement vehicle, you can see how real estate has similar characteristics and can be used very effectively in conjunction with your current retirement plan.

Your Take-Away: Using the equity in your principal residence is the most cost effective method of borrowing money to invest in Canada, and the recent market fluctuations have given otherwise cash strapped Canadians the opportunity actually own their first piece of investment real estate.  However, don’t throw caution to the wind and forget that there is a level of risk involved in owning real estate. Make sure you ask yourself if you are someone who is capable of dealing with the possibility of disgruntled tenants, or the ongoing maintenance that rental properties require. If so, then you may just be the next person who takes the leap of faith and buys their first real estate investment.

Your mortgage for a property is an entirely different discussion, so please ensure that you talk with a Professional Mortgage Consultant before you make a decision of this nature.

Until next time, happy investing.

Elisseos

Miller Has NEW Land Transfer Tax Passed

As of yesterday it became official that David Miller’s new land transfer tax proposal has been passed.

As of January 1st, 2008 second and subsequent home purchasers will be forced to pay a larger land transfer tax from between 0.5% and 2.0% depending on the purchase price of your new home.  The only exceptions are families who are buying their first home up to a maximum of $400,000, and a 1% cap on the tax of residential and commercial properties valued between $55,000 and $400,000. 

What’s worse is that the original proposal was that this new tax would replace the need for a raise in property taxes throughout the GTA. However, as the Globe & Mail reported late yesterday, it appears that we can still expect a raise in property taxes sometime in 2008. It seems to just keep getting better, doesn’t it?

 Your Take-Away: If you are looking to buy and close on a home anytime after January 1st, 2008 you will be forced to pay this new land transfer tax.  What that means for someone looking to buy their second or subsequent home is that you could lose up to an additional $10,000 in land transfer tax on a $500,000 home.  If you have the chance to buy and close sooner, it may just be something to seriously consider.

It’s not too much fun when writing about new taxes and the reality of our bottom line shrinking, but knowledge is power and hopefully this information will prove to be beneficial for those of you considering a new home in the near future.

Enjoy the rest of your day!

Chris

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