These daily financial tips are designed to be short ideas covering different aspects of family and business finances. They are short pieces intended to provide information to enable individuals, families and businesses to make informed financial decisions. Not all tips will apply to every situation, but over the course of a year, most financial topics will be covered. Check in regularly and share with friends and associates.
Real Estate is generally not thought of as one of the main asset classes, however, many people consider Real Estate as an investment so I have included it and will discuss in more length. Real Estate is often considered ‘real property’. In discussing Real Estate as an investment, it is important to distinguish between a Primary residence/matrimonial home and other types of Real Estate such as income properties/rentals, apartments, commercial buildings.
For the context of Real Estate as an investment, I am not referring to primary residences/matrimonial homes, although they do have some investable qualities. The primary residence is first and foremost a home for living purposes. From an investment perspective, the biggest advantage primary residences in Canada have is they can be bought and sold without capital gains taxes applying.
Many Canadians consider Real Estate as a ‘can’t fail’ investment. This is not the case. Like most investments, Real Estate values are not guaranteed and are subject to increase and decrease. Purchasing or holding Real Estate should be treated and viewed in the same manner as other investments such as GIC, Bonds and Stocks.
Like other investments, Real Estate has purchasing costs, holding costs and transaction costs. Real Estate in general should be viewed more as a longer-term investment given the capital investment requirements are substantial and so are the associated costs. Real Estate investments will generate income (like Bonds) by way of rent and increases in property values over time will be subject to capital gains (like stocks). Real Estate also has other associated costs such as tenant vacancies, repairs and maintenance, etc.
As with any investment, it is best to get professional advice from Tax advisors, realtors and investment advisors to ensure Real Estate investments are suitable and appropriate for your family situation and timelines.
Share these ideas with friends and family and come back to check out daily financial tips and ideas. If there are subjects you wish covered or questions, please email me and I’ll include them in future posts.