What is UP with the GTA and Should You Fall In Love with Rental Properties?

It is March Break – which is supposed to be the busiest travel season of the year.  While everyone else is probably on a beach somewhere, we are ankle deep in snow and doing our taxes.  I am pleased to say that we are well on our way to wrapping it up.

I used to dread tax season (I mean who likes paying the CRA?).  But my accountant says something great to put it into perspective – if you are paying taxes, it means you are making money!  It’s true isn’t it – I mean of course, I am all for structuring our finances in a way to minimize taxes, but at the end of the day, I’m happy to pay my fair share.

I’m sure most of you have been following the news – the real estate market seems to be the latest and greatest hot topic all over the media.  As a result, everyone is buzzing with emotion – some are excited, others anxious and apprehensive.

Taglines like:

Prices up 23% in GTA “The market is so out of whack in the Golden Horseshoe area stretching from just east of Toronto and southwest toward Hamilton and beyond that the imbalance between supply and demand is “without precedent,” CREA said.” – CBC News

and

“Price of homes sold in GTA last month up 27.7% from year ago” – The Toronto Star

And working with investors and homebuyers day in and day out, I speak from the front lines when I say that it is a tough market.  There are fewer listings “The number of sales rose 5.7 per cent region-wide to 8,014 homes, up from 7,583 last February, which had another day in the month.But the number of homes on the market dropped this year 12.5 per cent in the same period to 9,834, said TREB.” – The Toronto Star

So what’s the deal?  I know there is a lot of anxiety, both from homeowners and investors alike.  Most of all, many people are wondering what they should do based on the market conditions (present and predicted future values).

My answer is always that real estate is a long term investment.  I am not an economist, nor do I have a crystal ball.  Yes, I have my opinions about what the market will do, but I do not base my buying decisions on speculation.

My formula is always to buy long term rental properties.  Sure flipping or buying pre-construction and assigning and selling can make you money, especially in markets like the current one, but rental properties are my TRUE LOVE.

And here are some reasons why!

Leverage – you are using the bank’s money (usually 80%) of it!  That means, I only need to come up with 20% (find another investment that allows you to put so little of your cash in (compare to stocks and mutual funds).  But if the market appreciates (which historically it always has over long term ) – I make appreciation on the total amount!

Hustle – OK so I am a big believer in hustling.  If you haven’t watched any of Gary Vaynerchuk’s video’s, I urge you to – he is a huge inspiration.

So unlike stocks, or other investments that offer little control, I can use my skills, my knowhow and my ability to HUSTLE HARD to make things happen.  If I want to find a property that needs work and has some equity in it, I can do that.  If I need to raise money to make my next deal happen, I can do that too! Ultimately, I control the reigns.

Ability to Control My Investment

So I will openly admit that I am a bit of a control freak, especially when it comes to my money.  And with rental properties, I am 100% in control of my own investment.  From analyzing the numbers and ensuring I am purchasing a good property in a good area, to finding quality tenants and keeping the property running like a machine – I am the captain of the ship.

Multiple Ways to Profit

I’ve talked about this before, and have a great video on this too.  Owning a rental property long term has the benefit of continuing to profit from multiple streams – mortgage pay down (the most important one), cashflow and appreciation.  There are also some great tax benefits of owning long term rental properties.  Taxes are another reason why I’m not a big fan of flipping or selling property.

Stable and Predictable

Buying for the long haul is 100% stable, especially when you are using key economic fundamentals to purchase your properties.  There will always be a customer (your renters) since people will always need housing.  Moreover, you are not trying to time the market or predict the economy.  You are simply buying a home, renting it out and paying down your mortgage.  Simple, stable, predictable.

I have done my fair share of jumping from one form of investment to another and dabbling in all types of ventures. Ultimately, I have found that rental properties are my true business love.  There is nothing else quite like it out there.

So until next time, happy Canadian Real Estate Investing.

Jose Jafferji, REIA