Real estate is the business of buying land or properties to produce a return or income. Bare land can be purchased and held over years as value increases. Homes or condos can be purchased and lived in while the value increases or while improvements are made to increase value. Income properties are also common, purchasing a property for someone else to live in and pay rent. I’ll dive further into these methods but before I do, I need to mention it doesn’t always go this way. There are risks involved as with any investment worth participating in. Research markets in your area before considering real estate.
Let’s look at some numbers. These are the average house prices in Canada via www.crea.ca as of Dec 2016:
Northwest Territories: $451414
Newfoundland & Labrador: $251461
Nova Scotia: $213313
Prince Edward Island: $186573
New Brunswick: $159478
In the last year housing prices have risen 3.5% in Canada. Vancouver is the most expensive city to live in with an average house price of $948245, while Saint John is the least expensive city with an average price of $158439. I live in New Brunswick and my house is worth approximately $150 000, just below the average price here. My vacation property is worth approximately $80 000.
There are tax deductions when you own an income property:
Legal, accounting, and other professional fees
Maintenance and repairs
Management and administration fees
Motor vehicle expenses
Salaries, wages, and benefits (including employer’s contributions)
For anyone who is in the financial position to purchase an income property, they can be a great investment. Especially if a person is willing to manage the property themselves, they can create a relatively dependable income stream. However, if your not a handy man, become one before investing in real estate or hire a property manager to do the work for you.
An important factor to always remember is that interest rates can rise as well as fall. If your getting a mortgage, be prepared for interest rates to possibly double in the future when considering how much house can be afforded. This is again the cautious part of me speaking but you want to protect that investment and definitely don’t want to miss a mortgage payment.