As many people find success with their businesses, many others search for good real estate investments for their profits. Of course, we should all start with traditional tax preferred assets like RRSPs and other investment funds. These are the solid ground for good benefit planning for ourselves and our employees. However, I’m also convinced more entrepreneurs should consider some rental real estate as an important part of their portfolio. I know some business owners might tum away from this concept, but let me list a few reasons that may change your mind about this type of investment. Primarily, the main reasons are for future investments, additional incomes and numerous tax benefits.
Real Estate is one of those investment mediums where using the bank’s money couldn’t be easier. If you have the ability to make a down payment then you can leverage your capital and increase your overall return on investment. Buying rental property is based on speculation that it’s value could be a dangerous maneuver since cash flow is paramount. However, the appreciation of a real estate investment over the long-haul is certainly realistic. At the least you should be considering a tax-deferred benefit. In the future, you may even consider a charitable trust or an installment sale to lesson your tax liability further. Rental real estate can be a retirement plan. Most people are poor savers and lack the discipline to put a monthly deposit into saving accounts or RRSPs. Buying a rental property is a good sized investment that requires commitment to maintain it. In the long-run, you will be grateful if you don’t give up too soon and you will build future cash flow as well as your wealth. Depending on your classification, whether a active investor or Real Estate agent and your income level, there is a good chance your rental property and your overage of tax deductions can be used against your other incomes. However, always check with your accountant before investing so your expectations aren’t disappointing. Rental property provides investors with another opportunity to convert some personal expenses against valid business deductions. Rental real estate is a real business. This means that even travel expenses to check on your properties and payments to others who manage your properties can be deductible and increase the tax benefits. Because of depreciation and mortgage interest deductions, your cash flow should now be tax-free. In fact, a majority of the time, investors will never pay taxes on their cash flow and capital gains, only on the sale of the property.
I meet with many successful entrepreneurs and most have taken profits from their businesses and invested in rental properties. I have urged my clients to buy at least one rental property per year. I have seen clients with rental properties earning income they never imagined possible. Most of us will never get rich overnight unless they receive an inheritance. Generally it takes more of a long-term investment strategy with a diverse portfolio to truly build wealth.
What are you thoughts?
I thought it would be good to share my own personal story of success and how it lead into a successful business model in real estate investment.
When I was just a young man of a mere twenty five years old, I started out as an apprentice pipe-fitter. I began my family with my first of three sons enriching the lives of my wife and I. At that time I was given good advice and acquired two rental properties. At the same time, we ourselves were in the process of purchasing a family dwelling for our growing family so that we could continue to enjoy the moments of family life.
Then one day on the way to work, I had this thought. If I could just hold onto these three properties I will be able to retire early at the age of 50 years old and have a million dollars in equity as well have enough cash flow to bring in a wage $60,000 per year to live on with no mortgages by that time. At that point I realized at that moment that I’d stumbled upon a good thing. I was hooked on this process and my idea. I wanted to share the idea of investing in real estate as well as sharing the satisfaction it gave me with others by helping them invest for the long term and retire early.
I’d love to hear your comments about my story and share with you more information about real estate investing that will help you stay ahead of this game called life.
As for a lifestyle, so far this life has had more of a way with me than I have with it. There’s been a lot stuff that have happened so far and situations that just seem unbelievable. Up until now I have seen some interesting teen years, good parties in my 20’s, then marriage and switching to starting a family. Now I’m waking up again to a new era of relationships and business in my 30’s. What I have learned and believe to be true is that everything is everything and everything we create in our life comes from our heads first.
There are tools for this lifestyle creation, ways to secure your future and one of them is real estate. You may have heard of several people who have used it to get rich. Donald Trump is now running for president because his real estate got so big. My point is, with the right mindset you are set and by using real estate, it will help build the life you seek. This is my opinion and not to be used in place of legal or accounting advice, so take note at your discretion.
I have been down this path for over 10 years now and although the beginning is slow, time goes by and the pace picks up. The limits are endless and you can enjoy whatever lifestyle you like. Some techniques in real estate are buy & hold, flips, rent to own, lease options, agreement for sales, suited, multi family, renovate, college rentals, commercial and more. By being creative and by building systems to keep you organized you will have tangible assets to generate the outcome or experience you want to create in the short or long term.
Life is about having fun and feeling good. I want to make sure that this is achieved in a manner that is satisfying to all involved. By moving forward on a path of lifelong learning and improvement, I hope to encourage you to use whatever methods seem best for you. When you attach some investment property on the side, it can back you up with it’s consistency in case other ventures don’t go as planned or they run their life cycle. A resource that can make a huge difference in your success is Real Estate Investment Network for Canadians. As all my partners know, we are happy to share our thoughts and will always remain 100% transparent to ensure you have the best experience possible.
As lending rules get tighter and tighter we need to look at alternative ways to keep our money working hard. Multifamily dwellings investing has proven to be one of the most historically stable asset classes-missing the peaks, but not seeing the valleys. Expect steady cash flow and high returns on investment and no limit to the number of buildings you can invest in.
Buy low and sell high is the goal but the nice thing about multifamily is being able to increase the value by improving the overall performance of the business. An example would be to put in water saver shower heads to reduce your water bill therefore increasing the net return and adding value to the property. Another example would be to install vending machines to increase the total revenue or have cable included and add a slight increase to the rents. Of course just reducing your annual vacancy and maximizing your potential rents will help the value as well. After a few years you can show the bank the increased value through a few simple changes and possibly refinance to get your capital back out and into the next asset.
Yes there is more to consider in regards to capital expenses and other challenges with this type of rental but with the proper team and planning you will do just fine. Allowing your future self to thank you and retiring early will make it all worthwhile.