of Lloydminster

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RE/MAX Of Lloydminster
5726 - 44 Street
Lloydminster, AB
T9V 0B6

"each office independently owned and operated"

 

Making money in any real estate venture is a difficult task, and many people don't have the skills (or the stomach) for flipping houses. An alternative to this intrinsically risky activity is to purchase a property for the long term and rent it out. These types of income properties are becoming more and more common and the following article will touch on why income properties make so much sense.



Low Interest Rates

Interest rates in Canada are currently at historic lows, and the central bank does not appear to be interested in increasing the rate any time soon. These rates allow investors to finance their properties more easily and allow them to offset a great deal of their reduced housing expenses via the income generated by renting the property. It is important to consider other costs associated with the property such as utilities, insurance, maintenance, and property taxes, but by renting out your property you are effectively having someone else pay down your mortgage for you.

 

Using Equity for Future Redevelopment

Holding an income property as a long-term investment means that over time you will be paying down a significant amount of your mortgage while, potentially, seeing appreciation in your property value. This long-term strategy could leave you in a position for future redevelopment of your property using mostly income (or equity) generated from your property.

 

Tax Implications

Depending on your local taxing jurisdiction there are likely some tax implications to consider before renting out a property. It's important to understand the details related to property taxes, income taxes, and capital gains taxation. It is also crucial to understand what expense items are income-tax deductible. In many cases you will be able to deduct mortgage interest, utilities, property taxes, property management fees, and many other items. Some areas also permit investors to incorporate, allowing them to be taxed at the corporate tax rate while they pay themselves dividends. Each situation is different but incorporating can result in a corporate income-tax rate significantly lower than a person income-tax rate.

 

Grants from Municipalities

The need for higher density is a major priority for many local jurisdictions, and grant programs are becoming a popular way for municipalities to encourage investors and homeowners to add suites to their properties. These grants will not typically cover the entire cost of constructing a suite at your property, but some municipalities offer incentives of up to 25% of the construction expense.

 

Gaining Equity by Adding a Suite

Adding a rental unit, or multiple rental units, will typically add substantial equity to your property. This means that on top of having an investment that is generating income on a monthly basis, you will also have extra equity available if you do decide to sell your property in the short term.

It is important to remember that as a rental investment, your property doesn't need to be renovated to a brand new level. Sweat equity is great, but try to keep costs reasonable, and maintain building quality at a level comparable to the local market, and expect to see some depreciation over the life of your investment.

 

Long-Term Returns

The biggest benefit of holding a long-term income property is the return you will see over your investment horizon. Your property will produce income regularly, and hopefully appreciate in value, and this could all be happening while you're paying down some form of housing debt. For these reasons, the returns an investor can expect to see from their purchase or development of an income property have the potential to far outperform most other investments of a similar size.

 

 

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Going house hunting can be fun and exciting at first, but the more houses you look at, the more frustrating you might become -- especially if you just can't seem to find the perfect home. No one said that finding a new home was going to be easy, but you can cut down on some of your frustration by preparing yourself better for your quest to find the perfect home. Here are four tips that should help make the house-hunting process more efficient:

 

 

1. Do your research online 

Instead of driving around and looking for open house signs in neighborhoods that you like, do some research online. Not only will it be easy to find a schedule of open houses online, but you can learn more about the property by checking out the listing. There also are numerous apps, such as Open Home Pro, that display upcoming open houses. An online search can save you the trouble of going to an open house for a home that is in no way what you're looking for.

 

2. Create a plan 

Work with your real estate agent to develop a plan of action. This should include a schedule of open houses that you should attend. Your real estate agent can help you narrow down the list to open houses that are worth going to, as well as recommend those they have been alerted of through their vast real estate network.

 

3. Take plenty of notes 

Once you've gone to more than a couple of open houses, you're going to begin forgetting some of the smaller details you may have noticed while you were on the tour. In fact, you may begin confusing houses and forgetting which property had what feature. Jot down notes during the open house or directly following it. Your notes should include first impressions, likes and dislikes, and questions you may have. These notes will allow you to compare the different homes you've looked at; you will be able to judge a home based on its pros and cons, and help to inform your agent about your findings. The agent can then help you to prioritize new listings and find properties that fit your needs at an even more nuanced level.

 

4. Use open houses as a way to screen homes 

Instead of arranging private showings for every home you think you might be interested in, go to the open house first to see if a private showing will be worth your time.

 

House hunting can take up a lot of your time, which is one of the most frustrating things about homebuying. Doing your research beforehand, creating a plan, taking notes, and using open houses as a way to screen homes will make your house-hunting process much more efficient.

 

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