HELPING GLOBAL PROPERTY INVESTORS INVEST
IN THE CANADIAN REAL ESTATE MARKET
At Mesh Mistry, I want to help investors from around the world invest in the Canadian real estate market. Throughout the ages every major civilization has held one constant to be true; the need for shelter! If history has taught us anything, it is that the great land barons and landowners of the day were always the wealthiest! Now that might not always be true today, but it is fair to say that real estate has created more millionaires and multimillionaires than any other industry. Even if you feel that last statement is farfetched, real estate has definitely helped more average people ease the financial burden of everyday life than any other legitimate business. The problem with most people is that they only view real estate in two dimensions, either they are purchasing a home or selling a home “also known as your principal residence.” Although that is still true, there are so many other ways to generate income from properties and benefit from real estate.
The First method, which you all know is that of renting and becoming the dreaded Landlord! This method is as old as time. There are a lot of advantages to legally renting a space, the tax incentives alone can make it worthwhile as you can offset the cost of mortgage interest, not to mention all expenses associated with renting that space and also depreciating the unit (CCACapital Cost Allowance). The key thing here is to net positive cash flow, so after all your expenses are paid you should be making a few dollars. Now you must remember that you will not be making a lot of money in the short run, but you will be accruing wealth for the long haul. In addition, when you decide to sell off the property, you are only responsible to pay capital gains tax on half of the appreciated value of the property (eg: you buy for $200,000 after 10 years the property is worth $300,000, only $50,000 is taxable at your marginal tax rate!
The Second method, not as widely known but still very effective are assignments. Assignments are not usually published by new builders, but if you are fortunate enough to be able to capitalize on them they can be a relatively safe way to get an ROI (Return on Investment) of 50-100% on your money very quickly! Let me clarify, if you are able to find a property in a highly sought after area and after putting down your initial deposit, you are hedging on the fact that the property will appreciate and you will be able to sell your unit before the close date. In effect, you are buying low and selling high by assigning the rights to your Purchase Agreement to a new buyer at whatever rate you feel appropriate (usually slightly less than the current market rate.) (eg: Purchase price of new condo $200,000, deposit required $20,000. Closing date is 18 months away. In 17 months current market value of your unit is $225,000. You decide to assign the rights to your unit to a new purchaser for $220,000. You have just made 100% return on your investment because you put down $20,000 and you were able to sell the unit for $20,000 more, you save even more by not having to pay Land Transfer Tax and realtor commissions if listed after close.
The Third and more complex method is the Lease to Own strategy, this is a little more advanced for the beginner but can be very satisfying.