Guidelines for Investment in Real Estate

Making money in the Canadian real estate market is not an easy task. Yet, many have tried and succeeded. All you need to is to devise a strategy you would follow.

Here are a few things you need to focus on if you have decided on entering the real estate arena:

Acquiring a mortgage for more than one property is a tedious task. Few questions are asked when you consider mortgage financing for your primary property. While if you do the same for a secondary property, things are different.

While getting a mortgage for your secondary residential property, you must pay 20% of the amount as the down payment. Moreover, only a specific portion of your earnings from the rent of that property can pay down a mortgage. Down payments of as much as 50% have to be made while getting a mortgage for secondary commercial properties.

In all parts of Canada, any amount collected in form of rent from a property is income and becomes eligible to be taxed accordingly.

Capital gains taxes are also implied on your property as its overall value increases from the time of purchase till the time you decide to sell it.
Before you invest in real estate, learn as much as you can about the tax implications.

Expecting profits in short periods of time involves a lot of risk for the property business. Therefore, it is considered safer if your investment has a long-term goal to it.

The real estate market can be unpredictable, and you should give your investment some time to grow.

Cash Flow — One major goal while investing in real estate should be regulation of cash. Cash flow is the sum that goes into your pocket after collecting the rent and paying out all expenses.

The percentage of down payment and the nature of your mortgage also affect the cash flow.

Appreciation — Appreciation is the overall profit you make on the sale of your property. Selling an investment for more than what you paid for it is called appreciation.

Buying an apartment for $600,000 and selling it for $900,000 would involve $300,000 as the appreciation amount.

Equity — Equity is developed when your mortgage is paid by a third party i.e. the tenant who you’ve rented out the property to.
The mortgage can be paid by the tenant for as long as it is required and in the end, you’ll be left with a mortgage-free investment.