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Expert advice, market reports, and tips from the Niagara Region real estate professionals.
Forgive me, but today I am going to rant! I think you all know I believe in real estate investment. That hasn’t changed. And the basic premise of the Money Machine seminar is developing an investment portfolio, largely composed of residential rented property that will provide you with a steady stream of passive income into retirement. That hasn’t changed. But I believe I have a responsibility to tell both sides of the story. The good as well as the bad. And while being a residential landlord has always had its challenges, in some ways it’s getting tougher still.
Generally in our Money Machine seminars and related articles we concentrate on residential rentals. The reason is that for the novice investor it’s both easier to understand and easier to get into the residential investment market than it is commercial. Having said that, however, Commercial is a very valuable avenue for real estate investment and needs to be considered.
Whenever you purchase a property, you are essentially buying the land and improvements. That includes any trees or landscaping. It includes, of course, the bricks and mortar. But it also includes an intangible element. Something we call the “bundle of rights”. The right to occupy. The right to quiet enjoyment. And subject to the laws of the land, zoning etc, the right to remodel, to expand the footprint or demolish it for that matter.
Some time ago, the Government identified two distinct problems within the housing sector in Ontario which they set about to rectify. The first was availability. In many municipalities in the province, especially around the Golden Horseshoe rental units were extremely hard to come by. Vacancy rates were at or below 2%. Good for landlords. Not so good for tenants.
In the standard OREA Agreement of Purchase and Sale clause, 8 and 9 are related and they are important to note. Clause 8 states that the Buyer (actually his lawyer) shall have until a certain date and time to examine title to the property to see if, among other things, it’s present use may lawfully be continued, and Clause 9 goes on to point out that there is no representation or warranty that the property can lawfully be used for anything other than it’s the current use.
If you have ever attended one of my Money Machine seminars, watched our investment videos or read any of our investment articles such as those in this newsletter, you’ll understand the power of real estate investment as a vehicle for generation of passive income while at the same time allowing you to build up immense personal wealth. And, believe me, acquisition and ownership of rental real estate will allow you to accomplish both of those objectives.
The main objective of creating a portfolio of investment properties is to generate income. Passive income from the collection of rents. And of course, as with the case of any income, taxes are an inevitable consequence. But taxes are not payable on the total rent collected. Expenses may first be deducted. And this is one of the reasons record-keeping is so very important.