In 1903 the popular game Monopoly was invented to expose the unfairness of a social system where a small minority of landlords took advantage of the majority of tenants. Ultimately the game has taught us that it’s smart to own property – a fact that, for the most part, holds true today.
So why doesn’t everyone own a rental property? Most likely it’s because financial advisors advise against it for the simple reason that they’re unlikely to make money from it. Financial advisors make money from selling you investments and insurance.
If you’re eager to try investment properties on for size it’s actually relatively easy to get into the market. All that’s needed is an existing investment, such as your own home, for leverage and minimal monthly carrying costs.
Though many people worry that the rental income they acquire will cost them money because it’s taxable, the truth is that rental expenses such as a mortgage or line of credit interest are tax-deductible. And financed property will run at a loss, in many cases, for tax purposes. This creates a tax deduction against other sources of income and a tax refund.
Rental properties can be so effective as an investment that many people actually refer to them as turbo-charged RRSP. Without a predetermined maximum tax deduction limit like RRSPs, withdrawals aren’t forced at age 71 like RRIGs, contributions can be financed with interest deducted, unlike RRSP loans and the taxes paid on selling a rental property are at a 50 per cent capital gains tax rate, whereas RRSP withdrawals are fully taxable.
If you’re interested in investing in real estate, please contact me at 416-925-9191 or email me at Roxanne@ChestnutPark.com and I’d be happy to talk you through the process and help you find the perfect property.