Lots of buzz in the news about all the government changes and now changes in the mortgage and lending rules. I think this affects all of us, both new and old investors.
You can check out this week’s video where I share more about my thoughts on the current market and how
these changes are affecting things.
But change isn’t always a bad thing. It is in the face of change that there is usually huge opportunity. There is a quote by Mark Cuban that says:
In the course of my work I am constantly talking to new people and of course they are always asking me about the market and about the common fears that new real estate investors have.
So I decided to dedicate this blog post to them, and answering 5 of the most common questions asked by Newby Investors.
Of course these are questions that creep up in the minds of all investors from time to time – especially in the face of uncertain economic conditions or changes in the market.
1.The market is going down, or it is going to crash – I am just going to wait!
I think this is something that I hear all the time – lots of speculation and prediction going on out there. When the market was at it’s peak just a few months ago, there was talk of a crash. Now that the market has slowed down, there is talk of a further crash.
I’m not going to take this as a platform to talk about all the economics of Ontario and the areas we invest in, but I will say this. Especially after travelling to other countries, I realize how wonderful a place this is to live, and the rest of the world sees it too.
We continue to have large amounts of immigration and a shortage of land in and around the Golden Horseshoe.
But most of all I continue to emphasize that we buy real estate that fits with the model of being economically sound. What this means is that we buy properties in good areas where we can charge rent that covers our expenses. There is no speculation about what will happen next.
And we emphasize that the single family rental is the safest solution for new investors. Buying single family homes are also the easiest to rent, easiest to manage and probably easiest to sell if the need arose.
2. Owning a property is going to mean I’ll be fixing toilets and getting midnight calls?
I like to compare owning a piece of real estate to owning a business in a box. There is no doubt that real estate is not a passive investment. It means you are going to get your hands dirty once in awhile.
I have friends who invest in the stock market – and they are constantly on their phones looking at the prices and how much money they have made or lost – this is somewhat passive.
Real estate does require a much more hands on approach, especially at the beginning. But working with the right team of professionals, and a good reliable property management team can eventually allow you take a more hands free approach.
Tenants are the hardest part of the business, I have said that before. They are your customers, and without them (or with the wrong ones) your business can become a whole more complex.
3. I will pay a ton of taxes and capital gains when I sell my property?
I have people who purchase property in the hopes that they will sell and make a quick buck when the market ”goes up”. And yes, this is possible in some cases.
But there is also something called capital gains tax, and much like other small businesses, you are taxed a fair rate when you sell your investment properties for a profit.
This is good news – it means you are making a profit! And at the end of the day, we all have to pay taxes.
How do you avoid them – it is simple. Don’t sell your real estate. I look at buying property for the long haul, and unless financial circumstances change so much that there is a dire need to sell a property, I would never do so.
But I will say this – I can attest to how buy even ONE income property can change your life. I know fellow investors who buy a property for each child that they have, as an education fund for their future university tuition.
There is no investment out there quite like it. The longer you hold it, the more powerful it gets.
With time, you pay down your mortgage and reap the benefits of market appreciation – even with a minimal cashflow coming in.
You show me any other investment vehicle quite like it – or a small business model that is just as safe and secure backed by a piece of land.
I speak with confidence and experience when I say that real estate has changed my life, and provided a secure vehicle for our money.
So until next time, happy Ontario Real Estate Investing.
Jose Jafferji, REIA
Your Real Estate Investment Advisor, Coach & Realtor