The following is provided as information only and it is highly recommended that you seek the advice of legal and accounting experts before making any decision about investing in real estate.
Real estate, as an investment, is all about the numbers and the numbers have to make sense for you - and that assessment begins with understanding the revenue state that you are looking for.
Depending on the legal structure of your investment portfolio, the sum of its profits and losses will be applied directly to your personal income and taxed accordingly.
That said, investment losses can often be deducted from your personal income thereby reducing the amount of income tax you pay.
So, you first need to understand how the bottom line of a particular property is going to affect your personal bottom line at the end of the tax year.
Banks generally finance up to 75% of an income property’s value so it’s important to realize that you’re going to need a bit more money up front than what you may have required buying your family’s home. But, having your own home might allow you to extend a line of credit against it that could be used to finance the down payment and startup costs.
Understanding The Laws
It’s important to realize that operating an income property is the equivalent of operating a small business and you are held to local, provincial and federal health, building code and safety standards. And, there are laws that govern the relationship that you have with your tenants. Professional property management companies can act as a barrier between you and your tenants, handling the day to day administration of your properties including rentals, collection and service requests but it does not minimize your liability or accountability under the law.
Investing in real estate is one of the best opportunities to work with a licensed real estate practitioner because they understand the data that you need to collect and analyze, and can refer you to lawyers and accountants that will advise you on the laws and regulations that can assist you in realizing the financial gains that you seek.