There are hundreds of ways to grow your wealth and build your retirement plan. We are not financial planners and we won’t pretend to know all the details of solid retirement planning. But we DO know a little about investing in real estate as part of your portfolio. Here are some of the reasons we love owning real estate:
- There are 3 ways to make money from real estate:
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- Positive cashflow: When the expenses of the property are less than the income (all sources of rent), then you have positive cashflow. Smart investors only buy properties where the income exceeds the expenses.
- Paying the mortgage down: With every mortgage payment, some is interest and some is principle paydown. After 5 to 10 years, a sizeable portion of your mortgage principle is paid off. And the beauty is the tenants paid it off for you!
- Property appreciation: Very few things in life are certain, but we KNOW that real estate goes up, and real estate goes down. There is no guarantee in the short term that any property will appreciate. But over the long term, based on over a hundred years of tracking real estate values in Canada, we know that property values have trended upward.
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- Leverage: This is where we go back to Grade school math. When you have $100,000, you can buy $100,000 in stocks. If they earn 10% interest, then you end up with $10,000 growth in your portfolio. However, when you have $100,000, you can buy $400,000 in real estate (using 25% down payment for rental properties). Now if you earn 10% (combined positive cashflow, mortgage paydown and property appreciation), then you end up with $40,000 growth in your portfolio. We really like that math!!
- Real estate is tangible—and insurable! How many stocks can you insure for the full value, as of today?
- Real estate has a lot of tax advantages. This is where every investor needs to speak with their accountant to PLAN the best tax strategy legally allowed. And yes, the federal government may change the rules, but we can only plan for and play by today’s rules. When the game changes, we’ll change our strategy.
Want to learn more about the basics of investing in real estate?
We’d like to recommend 2 books to add to your summer reading list—because your financial future is worth it!
Real Estate Investing in Canada, is the best Canadian resource on real estate investing! Plus, all proceeds go directly to Habitat for Humanity—talk about having no hidden agenda! It’s an easy read, but still covers all the basics.
Rich Dad Poor Dad is foundational, but remember, it is written by an American. The rules of real estate investing are quite different in the USA and Canada.
