Making Money in Real Estate E-Book

Douglas Gray

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2012

Beschreibung

Successful real estate investments play an essential role in Canadian investors' portfolios. The growth in wealth in real estate markets has presented investors with tremendous opportunities to capitalize on and expand their range of investments, and has moved real estate investing from a niche product to a pillar of smart portfolio diversification. In Making Money in Real Estate, 2^nd Edition, Douglas Gray demystifies the Canadian real estate market for novice investors and presents new strategies for veteran investors. Learn to:

• Understand the real estate market cycles
• Find a property and assess its investment potential
• Build a trustworthy real estate team
• Arrange financing on good terms
• Use negotiating tactics that work
• Understand tax and legal issues
• Manage a property
• Avoid the pitfalls that many investors fall into
• Examine the pros and cons of non-residential property investment options

Readers of previous editions will appreciate the vital changes to mortgage rules, taxation and legislation, and the inclusion of information on commercial real estate. Thorough coverage in plain English makes Making Money in Real Estate, 2^nd Edition the next logical step for investors who want to begin or expand their real estate portfolios, and is a critical and indispensable tool in investment decision making.

Leseprobe

Contents

Cover

Praise for Books by Douglas Gray

Title Page

Copyright

Books by Douglas Gray

Preface

Acknowledgments

Chapter 1: Understanding Real Estate Investment

Why Consider Investing in Real Estate?

Understanding the Real Estate Market

Establishing Your Investment Strategies

Key Investment Strategies to Consider

Buying with Partners

Summary

Chapter 2: Types of Residential Real Estate

Condominium

Single-Family House

Property for Renovation

Recreational Property

Multi-unit Dwelling

Apartment Building

Raw Land

Summary

Chapter 3: Finding and Evaluating the Right Property

What to Consider When Selecting a Property

Where to Find a Property for Sale

Determining the Value of the Property

Summary

Chapter 4: Selecting Your Advisory Team

Common Selection Criteria

Selecting a Realtor

Selecting a Lawyer

Selecting an Accountant

Selecting a Lender

Selecting a Financial Planner

Selecting a Mortgage Broker

Selecting a Building or Home Inspector

Selecting an Insurance Broker

Summary

Chapter 5: Understanding the Financing Aspects

What Is a Mortgage?

Types of Mortgages

Sources of Mortgages

Key Factors to Consider When Selecting a Mortgage

General Contents of a Mortgage

Determining the Amount of Mortgage Available

Applying for a Mortgage

Cost of Obtaining a Mortgage

Defaulting on Your Mortgage

Creative Financing

Dealing with Negative Cash Flow

Summary

Chapter 6: Understanding the Legal Aspects

Types of Ownership of Property

Understanding the Purchase-and-Sale Agreement

Services Provided by the Purchaser's Lawyer

Services Provided by the Vendor's Lawyer

The Listing Agreement

Forms of Legal Structure to Hold Investment Property

Other Legal Cautions and Protections to Consider

Summary

Chapter 7: Understanding the Tax Aspects

Local and Regional Taxes

Provincial Taxes

Federal Taxes

Income Tax

Tax Implications of the Purchase Structure When Buying an Apartment Building

Summary

Chapter 8: Understanding the Insurance Aspects

Organizing Your Insurance Program

Types of Property Coverage

Types of General Insurance

Summary

Chapter 9: Buying Your Property

Selecting the Right Real Estate Agent

Determining a Property's Value

Preparing the Offer

Presenting the Offer

Giving a Deposit

Making a Deal

Using a Lawyer

Insuring Gain

Closing the Deal

Summary

Chapter 10: Managing Your Property

Types of Management

Keeping Records

Finding the Right Tenant

Maintaining Rental Properties

Avoiding Common Fire Hazards

Improving the Bottom Line

Saving on Expenses

Summary

Chapter 11: Selling Your Property

Determining When to Sell

Determining How to Sell

Preparing to Sell

Preparing the Property

Closing the Sale

Moving On

Summary

Chapter 12: Understanding Financial and Estate Planning

An Introduction to Financial Planning

An Introduction to Estate Planning

Summary

Appendix

Glossary

Further Education and Information

Index

Praise for Books by Douglas Gray

The Canadian Guide to Will and Estate Planning (with John Budd)

“The authors have done a masterful job.... This is a shelf reference every Canadian taxpayer and every Canadian family should have.”

—The Globe and Mail

“An informative, practical guide... The authors... cover all the bases.”

—National Post

“This guide promises a general, practical, and objective overview of the issues, options, and terminology involved in estate planning. Fortunately, it delivers on all counts.”

—CAmagazine

The Canadian Snowbird Guide

“... an invaluable guide to worry-free part-time living in the U.S.... by one of Canada's bestselling authors of business and personal finance books... most comprehensive book to address issues for retired part-time residents of the United States...”

—The Globe and Mail

“... I hate to sound like a cheerleader for Gray and his Canadian Snowbird Guide, but RAH! RAH! RAH! Regardless... the book is a complete how-to—written in his characteristically thorough style... Gray delivers the goods right where the Snowbirds live. If you or someone close to you winters in the U.S., you should have this book...”

—Business in Vancouver

“... Gray has written a reference book, thoughtful and complete, and prepared with the authoritative research skills and knowledge of a fastidious solicitor... as practical as a sunhat on a Tampa afternoon, and that alone warrants it a place on every southbound RV's bookshelf.”

—Quill and Quire

Mortgages Made Easy

“... Gray's latest endeavour is a good educational tool... no legalese here, just some good ol' street-level English that explains—mostly for the benefit of novices—all the real and perceived complexities of mortgages...”

—Calgary Herald

Making Money in Real Estate, 1st Edition

“Gray delivers the goods. It is all-Canadian, and not a retread book full of tips that are worthless north of the U.S. border. It's chock-full of practical street smart strategies and advice, pitfalls to avoid, samples, what-to-look-out-for checklists and information.”

—Business in Vancouver

The Complete Canadian Small Business Guide (with Diana Gray)

“... This guide is truly a gold mine... taps into the authors' extensive expertise... an encyclopedic compendium... the bible of Canadian small business.”

—Profit Magazine

“...Detailed, very informative, scrupulously objective as well as being written in a style that is refreshingly clear of jargon... This one is a ‘must-buy’...”

—BCBusiness

Home Inc.: The Canadian Home-Based Business Guide (with Diana Gray)

“Should be required reading for all potential home-basers... authoritative, current and comprehensive.”

—The Edmonton Journal

The Complete Canadian Franchise Guide (with Norman Friend)

“... This book tells it like it is, a realistic look at franchising and what it takes to be successful. The information provided is clear, concise, practical and easy to apply...”

—Canadian Franchise Association

Raising Money: The Canadian Guide to Successful Business Financing (with Brian Nattrass)

“... The authors have combined their formidable talents to produce what may be the definitive work on raising money in the Canadian marketplace... written in plain language, with a user-friendly question and answer format and contains invaluable checklists, appendices and information sources... a definite keeper for potential and practicing entrepreneurs alike...”

—Canadian Business Franchise

Risk-Free Retirement: The Complete Canadian Planning Guide (with Graham Cunningham, Tom Delaney, Les Solomon, and Dr. Des Dwyer)

“... This book is a classic... will be invaluable for years to come... it is arguably the most comprehensive guide to retirement planning in Canada today...”

—The Vancouver Sun

Copyright © 2005 and 2012 Douglas Gray

All rights reserved. No part of this work covered by the copyright herein may be reproduced or used in any form or by any means—graphic, electronic or mechanical—without the prior written permission of the publisher. Any request for photocopying, recording, taping or information storage and retrieval systems of any part of this book shall be directed in writing to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright license, visit www.accesscopyright.ca or call toll free 1-800-893-5777.

Care has been taken to trace ownership of copyright material contained in this book. The publisher will gladly receive any information that will enable them to rectify any reference or credit line in subsequent editions.

Library and Archives Canada Cataloguing in Publication

Gray, Douglas A.

Making money in real estate: the essential Canadian guide to investing in residential property / Douglas

Gray. — 3rd ed.

Includes index.

Issued also in electronic formats.

ISBN 978-1-118-11594-7

1. Real estate investment. 2. Real estate investment—Canada.

I. Title.

HD1382.5.G73 2012     332.63'24     C2011-907373-0

The material in this publication is provided for information purposes only. Laws, regulations, and procedures are constantly changing, and the examples given are intended to be general guidelines only. This book is sold with the understanding that neither the author nor the publisher is engaged in rendering professional advice. It is strongly recommended that legal, accounting, tax, fi nancial, insurance, and other advice or assistance be obtained before acting on any information contained in this book. If such advice or other assistance is required, the personal services of a competent professional should be sought.

John Wiley & Sons Canada, Ltd.

6045 Freemont Blvd.

Mississauga, Ontario

L5R 4J3

Production Credits

Managing Editor: Alison Maclean

Executive Editor: Don Loney

Production Editor: Pauline Ricablanca

Cover Design: Adrian So

Composition: Thomson Digital

Books by Douglas Gray

Real Estate Titles

Making Money in Real Estate: The Canadian Guide to Profitable Investment in Residential Property

Real Estate Investing for Canadians for Dummies (with Peter Mitham)

The Canadian Guide to Buying and Owning Recreational Property in Canada

The Canadian Landlord's Guide (with Peter Mitham)

101 Streetsmart Condo-Buying Tips for Canadians

Mortgages Made Easy: The All-Canadian Guide to Home Financing

Home Buying Made Easy: The Canadian Guide to Purchasing a Newly Built or Pre-Owned Home

Condo Buying Made Easy: The Canadian Guide to Apartment and Townhouse Condos, Co-ops and Timeshares

Mortgage Payment Tables Made Easy

The Complete Canadian Home Inspection Guide (with Ed Witzke)

Small Business Titles

Start and Run a Profitable Consulting Business

Start and Run a Profitable Business Using Your Computer

Have You Got What It Takes? The Entrepreneur's Complete Self-Assessment Guide

Marketing Your Product (with Donald Cyr)

The Complete Canadian Small Business Guide (with Diana Gray)

Home Inc.: The Canadian Home-Based Business Guide (with Diana Gray)

Raising Money: The Canadian Guide to Successful Business Financing (with Brian Nattrass)

The Complete Canadian Franchise Guide (with Norman Friend)

So You Want to Buy a Franchise? (with Norman Friend)

Be Your Own Boss: The Ultimate Guide to Buying a Small Business or Franchise in Canada (with Norman Friend)

The Canadian Small Business Legal Guide

Personal Finance/Retirement Planning Titles

The Canadian Snowbird Guide: Everything You Need to Know about Living Part-time in the USA & Mexico

The Canadian Guide to Will and Estate Planning (with John Budd)

Risk-Free Retirement: The Complete Canadian Planning Guide (with Tom Delaney, Graham Cunningham, Les Solomon, and Dr. Des Dwyer)

Software Programs

Making Money in Real Estate (jointly developed by Douglas Gray and Phoenix Accrual Corporation)

Preface

The past decade has seen one of the biggest real estate booms and busts in living memory. The boom times attracted many to become real estate investors, and the bust led to many more picking up bargain properties. And still others have hesitated due to concern over their lack of knowledge of just how to profit from the boom and bust periods. Others, of course, invested anyway, but lacked a due sense of caution or any clear plan or objective and lost money. The key to success is an approach that's ambitious and informed, prudent when it comes to sizing up the opportunities, and satisfied with the financial wealth and independence that prudence brings.

This book is a practical step-by-step guide designed to assist you in attaining your financial and investment objectives through real estate. It provides a realistic awareness of market conditions, and the basic knowledge for applying sound judgment to the opportunities that are available.

While sound judgment is always important, the information that makes it possible changes. This book appeared 20 years ago, in 1992, well before most investors were looking online for information: then again, in 2005, at the height of the real estate boom of the last decade. While it retained the core content of the original edition, it was revised to reflect the growth in popular interest in real estate investment and connected readers with the many new online sources of information.

This latest edition again updates the information regarding online sources, which have increased in scope and quality since 2005. Revised with the assistance of Peter Mitham, my co-author on Real Estate Investing for Canadians for Dummies (Wiley), it is designed as a reference to help you navigate the wealth of information now available while providing street-smart advice on investing in real estate in the post-boom era. Changes to lending practices, a more conservative attitude, and a focus on cash flow that will help reduce risk are all factors that contributed to this edition. Accordingly, the material in Chapter 5, “Understanding the Financing Aspects,” is significantly updated while Chapter 10, “Managing Your Property,” is expanded. Changes to tax policies, particularly the harmonization of federal and provincial sales taxes in Ontario, have prompted updates to Chapter 7, “Understanding the Tax Aspects.” Chapter 9, which in previous editions was devoted to negotiating strategies, has been fleshed out as a full-fledged guide to buying a property.

These changes, and a comprehensive review of the entire text, are designed to fine-tune the content to today's reality. The hope is the new information and a clearer presentation will increase your confidence when sifting through information and making significant decisions regarding your real estate investment. Whether you've bought a property as a principal residence, a home with a secondary suite, or as straight-up investment, the guidance this book provides aims to boost the return you see on your investment.

I hope you enjoy this book and find the information helpful and encouraging. Your candid feedback on how this work can better meet your needs is welcomed and will assist in preparing future editions. Please refer to my contact information and website at the back of the book under “Further Education and Information.”

Good luck and good fortune!

Douglas Gray

Vancouver, B.C.

www.homebuyer.ca

Acknowledgments

I am grateful for the kind assistance given to me by many parties, including the Canada Mortgage and Housing Corporation and the Canadian Real Estate Association.

Thanks to Ken Chong of DMCL, chartered accountants, in Vancouver, B.C., for all his helpful assistance from time to time on tax implications of various business and investment scenarios.

I would like to express my appreciation to Don Loney, Executive Editor at John Wiley & Sons, for his patience, encouragement, and insightful suggestions in the development of this new edition. I have had the pleasure of working with Don for over 20 years, since the first edition of this book was published. I have indeed been fortunate to work with such a consummate professional in the publishing business.

Last but not least, I would like to thank Peter Mitham, a talented professional wordsmith and real estate expert, and collaborator on this new edition. Peter has been my co-author on two other Wiley publications—Real Estate Investing for Canadians for Dummies and The Canadian Landlord Guide.

Chapter 1

Understanding Real Estate Investment

Many Canadians have made a fortune in residential real estate and have become financially independent in the process. Many, even when financial markets plummeted on the back of U.S. housing woes in late 2008, didn't see the same sort of losses on real estate that their stock portfolios did. By following a prudent investment strategy, you can mitigate the risks of investing in real estate and come out a winner—even during a downturn. Since real estate is often a long-term investment, you have time to pursue a methodical approach that lets you do the necessary research and acquire the background knowledge that lets you feel comfortable with the decisions you're making. This book provides that knowledge, enabling you to make informed decisions that minimize the risks and maximize the profits possible from your real estate investment.

According to a recent survey by the wealth management division of Merrill Lynch and private consulting firm Capgemini, there are approximately 282,000 millionaires in Canada. But this number accounts for investable assets only—not those with cash in real estate assets. Add those whose total net worth, including real estate, is more than $1 million, and the number of millionaires would be far greater. Many ordinary Canadians have profited simply through long-term home ownership and regular contributions to their Registered Retirement Savings Plans (RRSPs), both of which yield tax-free gains.

There are distinct advantages to starting your real estate investment by purchasing a principal residence. A starter home—whether it's a studio apartment or an older, 750-square-foot bungalow in need of some TLC—gives you a foothold in the market and a chance to start building equity. Data from the Canadian Real Estate Association shows that between 1981 and 2010, sale prices for homes increased an average of 1 per cent a month nationally. Of course, not all months or geographic areas were equally favoured, but it is indicative of the long-term trend. Another Canadian study showed that residential real estate appreciates with an average margin of 4 to 5 per cent over the rate of inflation. Still, a third Canadian study demonstrated that the average return on residential real estate investment exceeded other forms of investment.

The key conclusion is that making money in real estate is not an impossible dream, one only for professional tycoons, but a realistic possibility for the average Joe. Sure, as with any investment, there are risks and pitfalls. But by learning some basic principles and applying the strategies outlined in this book, you can make a profit, build your personal wealth, and even ease your way into an early retirement. The tips in this book will also save you money in many different ways.

The preface gives you an overview of what to expect from this book. Although each chapter is self-contained, they should all be read thoroughly as the concepts, tips, strategies, and pitfalls are frequently interconnected in terms of the overall real estate investment environment. Look through the detailed table of contents, including the appendix material, to get an idea of what to expect.

This first chapter is an important foundation chapter to assist you in understanding the framework in which you will be operating. Whether you are buying your first home or other residential revenue property, you can't operate in a vacuum in terms of the market. Knowing how the market works will develop self-confidence, street smarts, and improve your chances of making the right choices. This chapter covers why you should consider investing in real estate, understanding the real estate market, establishing your investment strategies, buying with others, and avoiding the pitfalls.