Category Archives: foreign investors

What is the best age to invest in real

What is the best age to invest in real estate?

Knowing the best age to invest in real estate is one of the most frequent doubts that those who are beginning to think about their future have. Especially because they see in the real estate area a financial security that other types of investment as the stock market no longer offers.

The short answer is that there is no right age to invest, but the sooner you do it, the more opportunities you will have to make money – and your investment will last longer.

However, it is true that investing is not a habit that we have all been taught. Not all of us receive financial education, and some do not even have the habit of saving money. We know that it can be difficult to do when you are young and you are between your twenties or beginning the thirties: travel, shopping, transportation expenses and fashion technology tend to monopolize the attention of your money.

Unfortunately, this lack of financial education ultimately affects the future. Especially when you decide to start investing and you realize how much time you lost because you did not do it before.

Why should we start investing as soon as possible?

As you will remember, one of our 10 tips for investing in real estate and not die in trying your purchase, is to understand that in real estate investment, patience is the key to success.

Something that guarantees the value of a property is the capital gain that it has, depends on the location in which the property is located. The capital gain acquires more value over time. That is why the big investors are those who can analyze the market and see beyond what is trendy. Imagine if 10 years ago you had invested in real estate developments in the Riviera Maya, or in real estate developments in Tulumplaces that are currently a magnet for tourism and foreign investment.

That’s why we say that the best time to invest is now; the more time you spend, the less chance you will have of acquiring properties at a lower cost that guarantees a high return on investment.

We must also consider that the responsibilities we acquire over time can make it more difficult to become a real estate investor. Marrying or having children can make you reconsider your expenses and how much money you can use to invest.

Each individual has different priorities and opportunities. There are those who see in their twenties the opportunity to promote a future while there are others who can invest only after their 30’s or 40’s. It is also normal and natural for some to think about investing until after retirement, when they have the money to do so.

Nor can we deny that each generation has different perspectives on what we should consider a priority and what not. For example, while for millennials acquiring experiences is a priority -as traveling- for generation x and baby boomers, acquiring properties is more important.

However, this does not mean that millennials – who are between the ages of 23 and 38 – have a chip that prevents them from being good at investing in real estate, on the contrary it is they who are changing the notions of success and ways of doing business and even as we think about work and lifestyle, this makes them less incompatible in investing in real estate, they are the ones who are beginning to consider investing their money to obtain financial independence.

For example, for the baby boomers and generation X financial security meant having a stable job and a fixed salary in order to save for retirement or get their pension. Today the notion of working from home without the need to attend an office is a reality for many people, as well as the existence of jobs that 30 years ago were difficult to imagine.

30 years ago it was hard to think that ordinary people could make money using the internet. Computers and the Internet were exclusive to those who were studying something related to technology. Today you do not need to be a hacker to be able to use digital platforms to make money like blogs or investing in services like Uber.

The orange economy – that is, the creative economy – allows retirement to become more possible at an early age. Which has also become possible because more and more people decide to invest their money in a smarter way – and do it at a young age – to be able to live on their investments and not have to be dependent on a job.

Years ago we thought that buying a property was to live in, today thanks to applications like Airbnb, more and more investors decide to buy apartments and houses only to rent them on these platforms.

You do not need to be a millennial to start investing. The technological evolution has made both applications and platforms as well as access to them, are increasingly easier to use.

For example, since 2017 Airbnb host users over 60 years have increased by 120%, while women over this age have become the best rated on the platform. Which indicates that even baby boomers see technology as an opportunity to get a better return on investment with their property.

What is the best age to invest in real estate?
Investing in real estate is possible at any age, but the sooner you do it, the more opportunities you will have to enjoy your money.

What is the best age to invest in real estate?

As we mentioned, not all ages or stages are the same for every person. For some it may be impossible to invest in their twenties and find the possibility of doing it later.

Our best recommendation is that rather than being guided byan ideal age you start doing it for the goals you have and the opportunities that come your way.

There are many myths around investment, especially when you want to do it at a young age, and one of the factors that keep people away from real estate investment is the lack of knowledge on the subject and investor stereotypes. We are not surprised when we hear cases of clients who want to become investors but fear not being able to do so because they do not understand numbers or be experts in the subject.

Knowing the real estate sector is one of the biggest keys to becoming a successful investor, this does not mean that it is a privileged knowledge that you cannot access.

Many millennials have the fear of investing in real estate because they think they need to buy a house to do so, and they ignore the investment possibilities that residential or industrial lots have.

For this reason, they fear not being able to do it because they believe that it is economically impossible for them, and they do not consider the possibilities of acquiring properties in other cities. For example, for some foreigners, investing in Mexico is a better option than doing it in their countries, but in the same way for some Mexican residents, investing in states such as Merida where there is increasingly strong demand in properties not only for housing but also for businesses and offices, it can be more accessible and profitable than doing it in places like Mexico City.

That is why it is important that you do not wait to have an ideal age and start thinking about becoming an investor or making an investment from now on. So the sooner you do it, the sooner you can designate your budget and create a work plan to invest or start saving money and then invest.

Otherwise, as you let time go by, you will be less likely to find suitable properties for yourself and especially if you have the opportunity to invest in places that are in presale in areas that will later have even more capital gain.

What is the best age to invest in real estate?
Millennials are redefining what financial security and quality of life mean, so real estate investments are becoming an option for those who want to travel or retire early.

How to start investing in real estate?

One of the most common mistakes made by young people who aspire to become investors is to obtain immediate profits and be able to spend them on whatever they want. But as you know, this is not possible in the real estate market.

Being an investor is a goal of many to be able to have financial freedom and not be tied to a job or to live experiences like traveling or living in different parts of the world, investing to earn money immediately is not an actual goal.

This does not mean that you cannot earn an income in a short period of time. For example, apartments near tourist areas can generate profits if you decide to rent them. The same happens if you acquire property near schools, universities or hospitals.

What we really mean is that if you want to invest to enjoy the results you need to be patient and prepare constantly about the subject.

The preparation on the subject not only includes understanding how the market works, but also observing and analyzing where it is going.

That is why it is very important that you start to know very well and read everything about the area and the developments that are developing in the city you are looking to invest. Find out about the market and how real estate works in the place. About the papers you must have in order and the types of credits -if you’re considering obtaining one- to which you can access.

Begin to consume information and observe how other real estate investors are generating income with their properties. One of the advantages of investing in real estate is that it is a safe investment, but it also gives you the opportunity to take advantage of your investment.

There is a lot of information especially now that we live in the age of the Internet, but it is always good that you can approach the experts and work with a real estate agent to solve your doubts if you are already thinking about acquiring a property. Ask everything you need to know about the property and the area: the places of access, the maintenance fees, the projection of growth and the amenities with which the development has.

What is the best age to invest in real estate?
One of the keys to real estate investment is patience. Real estate usually increases its value thanks to the capital gain, and this depends on external factors of the property such as the location and the services that are around it.

What factors should I consider when investing in real estate?

We already mentioned in our definitive guide of the real estate investorif you want to be successful when acquiring a property you need to analyze the location and interests of your possible market without letting yourself be guided by the trends.

Actually, what makes your property acquire value is the capital gain of the area. This depends on external factors such as the location, amenities and even the roads that the property has.

Mérida is a city that we love to take as an example because the boom that is experiencing is related to the intervention of factors such as security and the excellent location in an area that attracts tourists and allows them to have access to beaches and archaeological sites.

In the best cities to invest in Mexico we have also mentioned the importance of decentralization that Mexico is living and Mérida is an example of how the diversity of industries can be an important factor in the development of the economy and in the demand for properties and offices, and therefore is another opportunity to ensure your future.

The more diverse of jobs and industries, the more likely you are to be victorious in your investment, as in the case of a crisis, for example, the closure of a factory or a big company that is in the area.

That’s why we emphasize the importance of not investing where everyone is investing, in the end -it may sound cliche- you get what you pay for.

Many new investors make the mistake of acquiring goods in areas that, although cheap, end up being insecure. In the end these investments end up being losses because they end up investing even in luxury finishes in areas where house prices are quoted in an amount lower than what they are thinking of asking for, whether they are rents or for sale.

The capital gain depends a lot on the area, the location and the amenities. And even if you get a very cheap property, in the end you will not be able to generate income if it is located in an area where there is no capital gain or the market cannot access the amount of money you propose. You will lose more money, unlike you decide to invest in an area with a guaranteed gain capital, thanks to all these external factors that we already mentioned.

Another factor that we highlight and that you have to take into account are pre-sales. There is no better way to guarantee your money than buying before, remember our example of the Riviera Maya and Tulum? Now imagine how much it will cost to buy a housing development once it is popular.

Acquiring properties in pre-sale is an excellent way to invest your money, since once the developments begin to acquire capital gain, your property will have more value than what it cost and you can adapt your income according to the costs of the area or decide to sell it to a higher price, or keep it to get more return.

So, if you’re wondering what is the best age to invest in real estate? It is better to start asking yourself; how can I start investing in real estate? And start making a plan so you can reach your goals and start creating a safe economic future for you.

Source:  Peninsula Development – OCTOBER 28, 2019

Tagged , , , , , ,

How to Get a Reluctant Spouse on Board With Investing in Real Estate

indecision
Is the white-hot fire of real estate investing burning in your heart? Do you solidly know within your gut that real estate investment will be life-changing? Do you have vivid pictures of the freedom owning property will offer you?

Hmm, now how to impart that passion to your spouse…

You want them to see it as you do. You want them to feel as intensely committed as you feel. You want them to be as excited as you are. You want them to see the vision for your future.

Why You and Your Spouse Would Make the Perfect Investing Team

You can do this together. You have a lot of practice.

Now let me say, this may seem different than other decisions in your relationship, but actually it’s not. Really!

I say this because all types of big decisions like this in a relationship require similar elements. Among these are a bit of understanding, a whole bunch of open-hearted listening, a giant amount of belief, and a huge heap of trust in each other. I mean it!

Planning a wedding, having a child, changing jobs, moving, buying a car together, taking out a student loan, purchasing your first home, raising your kids—every one of these requires discussion and negotiation. The point is, every big decision obliges you to be there for each other’s excitement. But it also necessitates being patiently present for each other’s fear and anxiety.

Where to Start the Discussion About Investing

So, let’s step this out.

First, have you already talked to them about investing? If you haven’t, then that is where you need to start. And then keep the tips below as tools in your tool bag to make the convo go smoothly.

Young displeased black couple.American african men arguing with his girlfriend,who is sitting on sofa on couch next to him with legs crossed.Man looking away offended expression on her face.

However, if you have already talked to them—and they were less enthusiastic than you wanted or expected—perhaps the conversation had one or more of these possible outcomes.

You two discussed it and:

  1. They seemed open, but they were not necessarily excited about the idea
  2. They were fine with you doing it, but they don’t want to be part of it
  3. They have no interest, and they do not want you to do it at all

OK, so none of these three scenarios are what you most want, but they are manageable. You have managed to work out compromises on other large events in your life, right? You can do the same here.

Think of it as excellent practice for negotiating a complex real estate deal. (I’m not kidding here.)

Why Don’t They See the Potential in Real Estate That You Do?

Let’s get into the reasons, the “why” they didn’t feel your same sense of sureness and excitement.

When you negotiate with a property seller, your first job is to find out what they really want or what is holding them back from saying “yes.” And honestly, when you first start talking with a seller, you cannot assume that they even know or are truly “in touch“ with what their hesitations are. Nor can you be sure that, even if they do know what’s bugging them, they will confide their reasons to you!

They might be too embarrassed or ashamed to say them aloud—or even to admit them to themselves. Or it might make them feel vulnerable to admit their hesitations to you. You have to uncover objections by asking questions. You have to listen carefully and openly. You need to pay very close attention.

This is the same process you will use with a hesitant spouse.

Focus on Problem-Solving

If they aren’t overly enthusiastic to talk about real estate investing, be patient. Talk with them in a setting that is quiet and relaxed. Let them finish their sentences. Ask questions without anger, accusation, or judgement.

Remember, you are collecting information so you can solve the problem. Don’t make this an argument. Use your best puzzle- and problem-solving skills.

The solution to this puzzle is one of the most important solutions you will ever uncover. So, I repeat, pay close attention. Listen to the clues.

You are not just a “spouse” in this situation, you are a detective, a troubleshooter, an analyst, an entrepreneur, a visionary.

You see, if you can truly get to the heart of what is making them uncomfortable, only then can you begin to brainstorm solutions. Those solutions need to be two-sided, because when you can help your spouse feel better and more comfortable, you minimize their negative reactions and you increase the likelihood of their participation and willingness.

Related: Investing With Your Spouse? STOP and Read These 4 Survival Tips!

You also increase the possibility you will engage your spouse in your excitement about the opportunities real estate offers your family.

OK, after years as a therapist, I will tell you that when it comes to real estate investing, there are some very specific stressors, fears, and anxieties that people tend to experience. These usually boil down to one or more of the primary concerns listed below.

That said, no two situations will be identical. Your situation with your spouse will be unique.

If you review these potential concerns before you have the conversation, you can develop some well thought out and realistic solutions for how you can alleviate your spouse’s specific hesitations. Anticipating objections and concerns this way should increase your chance for a successful conversation and positive movement ahead in your joint real estate investing future.

Pick out the issues below you are most likely to face (or have already experienced) when talking with your spouse about your desire for their participation in a real estate investing venture. Write out the questions you might encounter and how you might respond. Note the trigger words you might want to avoid with your spouse—you know, the ones that tend to spark an unfortunate outcome!

Then, pick a time and place, and go for it!

Consider Their Fears

Money fears: The fear of losing money and being left without security or unable to pay the bills.

Not enough time: In the beginning, real estate takes time and commitment. As with all skills and education, it requires study, reading, practice, and repetition until it becomes seamlessly familiar.

Afraid of failure: Whenever we start new things, we run the risk that until we master the skills and knowledge, we may not be as successful as we want. But practice improves everything!

Uncomfortable with change: Some people love change—even crave it—but there are others who abhor change. Most of us are somewhere in the middle. But in truth, fear of change is almost as common as the fear of public speaking, which is the highest reported fear. The best way to deal with this concern is to just jump in and try. The sooner you start, the sooner the transition is in the past.

Not knowing who to trust/fear of being taken advantage of: Being new at something means listening to lots of other people’s advice, paying attention to tons of new information, and not knowing which is trustworthy and which is not. Practice makes perfect, or at least very good. So, the more you perfect your skills in listening to your gut while really hearing the person opposite you, the sooner you will know “when to hold them and when to fold them.”

Fear of getting started: When learning something new, it can be very difficult to decide where or how to “jump in,” and those concerns can be intimidating.

Don’t think they’re interested: Sometimes when we don’t know a lot about a topic or skill, we perceive it as boring or uninteresting. Then, once we are exposed to it, we may recognize that we have lots of talents that would make us incredibly successful in that area. But we don’t know until we try.

Afraid of handling tenants: It can seem quite daunting to suddenly have so much power over people’s daily comfort and happiness, but it’s not as hard as it seems at first. Start by giving people the service you would want (just that good ole “golden rule” stuff). Over the years as an investor, I have found that communicating with tenants, sellers, and buyers in the manner I wish to be communicated with goes a long way toward creating positive results, happy tenants, and satisfied colleagues.

No experience/“I don’t know enough”: No one wants to look like they are clueless. It never feels good. Word of wisdom: sometimes the honesty of saying, “I’m new at this,” goes a long way in getting people to warm to you, open up, and be willing to help you deal with any of the hiccups occurring in any new line of business.

Other investors will always be able to find better deals: It’s true! My answer to that is, “Yes, because they keep trying.” They keep networking to meet more people, they make offers on more properties, they talk to more sellers. Does any of that mean you shouldn’t start? Nope. Why? There will always be a “Joe Investor” who will do a deal and make $60K. That doesn’t mean that a deal you do that makes $30K is any less a good deal. Your wallet will still be VERY HAPPY! (This I guarantee you!)

Scared to get it wrong and look foolish to family and friends: This is a really significant fear for a lot of new investors. But are those same family and friends taking risks to build wealth? Are they investing in themselves and their futures by learning new things and creating new investment opportunities? Probably not, and therefore your willingness to invest and trust yourself makes you something special. You and your spouse are pioneers on the adventurous journey of increasing your wealth and building your own personal future success.

Related: A 3-Part Plan for Presenting Real Estate as an Investment to Your Spouse

New Skills Bring New Discoveries

So honestly, some of this list may resonate for you, while many of these concerns may not seem realistic or valid at all. It doesn’t matter. You yourself have your own unique worries and stresses in your heart and mind that your spouse does not share.

Your spouse has a different set of concerns.

We all have insecurities and deep-seated discomforts that can hold us back. But remember, if you can be there to provide support, if you can be present and caring for your spouse during these scary and exciting life changes, you are also very likely to discover the two of you are an amazing team that knows NO LIMITS!

Source: BiggerPockets – B.L. Sheldon

 

Tagged , , ,

Ontario’s 16 new housing measures

Houses are seen in a suburb located north of Toronto in Vaughan, Canada, June 29, 2015.

The Ontario government has announced what it calls a comprehensive housing package aimed at cooling a red-hot real estate market on Thursday. Here are the 16 proposed measures:

  • A 15-per-cent non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations.
  • Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded.
  • Updates to the Residential Tenancies Act to include a standard lease agreement, tighter provisions for “landlord’s own use” evictions, and technical changes to the Landlord-Tenant Board meant to make the process fairer, as well as other changes.
  • A program to leverage the value of surplus provincial land assets across the province to develop a mix of market-price housing and affordable housing.
  • Legislation that would allow Toronto and possibly other municipalities to introduce a vacant homes property tax in an effort to encourage property owners to sell unoccupied units or rent them out.
  • A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.
  • A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges.
  • More flexibility for municipalities when it comes to using property tax tools to encourage development.
  • The creation of a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions.
  • An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.
  • A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions.
  • The launch of a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures and any additional steps that are needed
  • Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
  • A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.
  • Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.
  • Provisions that would require municipalities to consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes, among other things.

Source: The Canadian Press – April 20, 2017

Tagged , , , , , , ,

Impact of Trump win on Canada’s real estate: Time to hunker down in your cottages

U.s. presidential election - donald trump

The world’s collective jaws dropped after the early morning announcement: The next President of the United States is reality-TV star, Donald Trump.

But Trump’s victory in the U.S. presidential race raises more questions than confidence—which was reflected in the greenback’s dip early this morning while safe-haven sovereign bonds and gold shot higher. The market is now reflecting fears of a prolonged global uncertainty over the new presidential leader’s policies.

What happens to interest (and mortgage) rates?

For the last few weeks, analysts were predicting that the U.S. Federal Reserve was poised to gradually start increasing interest rates, to reflect the country’s slowly growing economy. Trump’s win may have scuttled this strategy.

Part of the problem is that Trump’s promise to deport 11 million workers—because they presumably entered the country illegally—will have a dangerous impact on America’s currently tight labour market.

Unemployment in the U.S. dipped to its lowest in June at 4.9%. “The country is entering what economists call full employment,” says Phil Soper, CEO of Royal LePage. “By taking that many workers out of the labour force, Trump could bring business to a grinding halt.” Quite simply, it’s a plan that most business people and many leading economists say is very damaging both to the U.S. and to the Canadian economy.

Remove that many workers from the labour pool and you create a labour shortage, which could prompt businesses to contract and slow down in order to fend-off the quickly rising cost of wages.

To combat a business contraction, the U.S. Federal Reserve may abandon decisions to start raising interest rates. The idea is that by keeping rates low, the Fed will continue to encourage banks to lend money and convince businesses to expand (through the use of cheap credit). But it’s been six years of near-zero rates. For many it was time to start seeing better returns. With prolonged low rates from the Feds, it’s unlikely that the Bank of Canada will increase rates, so we can probably expect a prolonged ultra-low rate environment in both Canada and the U.S.

 

Impact on home buyers: Continued low mortgage rates

For anyone buying a home, Trump’s win may help suppress any potential mortgage rate increase that was on the horizon.

This continued low-rate environment won’t stop the slight uptick in mortgage rates, caused by the recent Federal Liberal mortgage rule changes. However, it may prompt different levels of government to consider alternative methods for cooling heated housing markets. According to CBC.ca, Ontario Finance Minister Charles Sousa believes:

“something has to be done” to help people deal with soaring home prices in Toronto.

Sousa is poised to make an announcement next week as to how provincial government will help first-time buyers in Toronto, without hurting home prices in surrounding areas.

For tips on how U.S. citizens can buy in Canada, visit the BRELTeam’s primer on buying homes in Canada.

Impact on home sellers: Could be a rush to buy in Canada

Trump’s presidential win could be a boon for some home sellers in Canada. We could actually see a surge in demand for Canadian homes, says Soper. “Some [Americans] may be so fed-up that they decide to head north.”

This would certainly bolster “Brand Canada,” says SopeMo, as more demand may help support real estate prices, particularly in larger urban centres. Of course, this assumes the American dollar won’t lose value and remove the relatively high purchasing power a U.S. buyer would have in Canada.

If Americans do decide to move north, sellers in bigger urban centres could see the biggest impact as the U.S. dollar still has about 30% more buying power than the Loonie. Home sellers in Vancouver, however, shouldn’t expect a big uptick in American interest, as the Foreign Buyer’s tax that was announced and introduced this past August, will probably dampen interest in property in the Lower Mainland.

 

Impact on vacation properties: Hunker down

Probably the biggest impact will be felt by vacation property owners. Americans are the largest foreign buyers of Canadian property. “Part of the reason is the relative affordability of our recreational properties based on the strength of the American dollar,” says Soper. But the dip in U.S. currency, could mean a wholesale withdrawal from the Canadian vacation property market—and this could impact Canada’s recreational property market for years.

For instance, Nova Scotia and New Brunswick were extremely popular destinations for Americans prior to the 2008/2009 financial collapse. But after the global credit crunch, cottages and lake-front home prices plunged as much as 60%. Some of these markets are still in the process or recovering, almost a decade later.

 

Impact on house prices across Canada is uncertain

The impact of Trump’s election doesn’t stop there. Pre-election promises to place massive tariffs on Chinese imported goods and to “tear-up NAFTA” could mean trading-wars that could seriously impede Canada’s currently slow-growing economy.

In relative terms, trade is much more important to Canada than to the United States. The Americans can afford to be insular since they have 325 million people in their market to our less than 35 million. “Any protectionist stance from the U.S. would do significant damage to Canada,” says Soper. And any hit in our slow-growing economy could further prolong our climb out of the ultra-low interest rate environment. Worse, it could prompt lay-offs in certain parts of the country, where exports and trade help shape the local economies. This will impact localized housing markets.

Think Alberta and low oil prices, and you get the picture.

Source: Money Sense – by   November 9th, 2016

Tagged , , , ,

Major mistakes investors make when buying U.S. real estate

 

There are still opportunities to take advantage of U.S. real estate, according to one veteran who has penned a guide for Canadians interested in purchasing property down south.

“The number one mistake is they don’t own it the way they need to own it based on their circumstances. For example, they may own it as a Canadian corporation; well, that’s perfectly legitimate in Canada but owning real estate in that way in the U.S. causes double taxation,” Dale Walters, author of Buying Real Estate in the US: The Concise Guide for Canadians, told Canadian Real Estate Wealth. “If you get a U.S. advisor, they may recommend they use an LLC. Hopefully the word is out now that in Canada that would cause double taxation.”

Walters’ book focuses a great deal on tax implications for Canadians who purchase real estate down south as well as information on the best way to own a property.

“The book is informational; it’s a tax book primarily. How do you own real estate in the U.S., what’s the proper way of owning it, the options, what are the tax consequences of the various ways of owning it because each way is a different tax outcome,” he said. “How do you deal with rental income and what are the tax consequences of that. You’ve got potential liability issues, how to protect yourself, non-resident estate tax potential – all of those things I cover.”

It can be daunting to purchase real estate overseas, but Walters argues there are still opportunities for all different kinds of investors; including deals for those looking to own vacation properties, become full-time landlords, and those interested in commercial properties.

There are also various markets that provide different risk profiles.

Walters believes there are two major reasons Canadians are still interested in U.S. real estate: Diversification and the availability of bargains.

“The usual markets that have market appreciation potential which would be, generally speaking, the sun belt. Southern California, Arizona, Texas, and Florida, primarily,” Walters said. “If you’re looking at some higher-risk, possibly higher opportunity, you still have places like Detroit and places like that.”

Source: Real Estate Wealth –by Justin da Rosa26 Oct 2016

Tagged , ,

Trudeau government to close foreign-buyers loophole

A broker puts up a For Sale sign before an open house in Toronto in this 2015 file photo. (Darren Calabrese For The Globe and Mail)

Finance Minister Bill Morneau will unveil Monday new measures aimed at slowing the flood of foreign money pouring into overheated housing markets like Vancouver and Toronto, a significant federal intervention in the sector.

Ottawa will close a tax loophole that allows non-residents to buy homes and later claim a tax exemption on the sales, a government source said Sunday. The government plans to make sure the principal-residence exemption is only available to individuals who reside in Canada in the year the home is purchased.

Housing prices have soared dramatically the last few years in the Vancouver and Toronto markets, triggering a vigorous debate about the role of foreign money. British Columbia has responded by imposing a 15-per-cent foreign buyers tax on homes and collecting data on who is buying property in the province. Ottawa has also been preoccupied with the issue, with Mr. Morneau creating a working group to conduct a “deep dive” into the state of the housing market and make recommendations on possible policy actions.

Mr. Morneau will announce new measures to combat offshore speculation, including closing the loophole, in a speech in Toronto on Monday. The moves follow a Globe and Mail investigation that revealed a network of speculators flipping homes for profit and avoiding taxes by classifying them as principal residences.

Under the Canadian tax code, homeowners do not have to report the sale of any property that they designate their principal residence, and do not pay tax on the increased value – or capital gains – of that home. In order to make that designation, a homeowner, their current or former spouse or any of their children must have lived in it at some time during the year for which the designation is claimed.

However, there has been widespread abuse of the exemption by foreign buyers who claim residency either for themselves or their spouses or children simply in order to avoid paying taxes on real estate speculation. Non-resident investors must pay capital gains tax at the time of a sale.

Multiple sources have told The Globe of the widespread abuse of the primary-residency exemptions in the Greater Vancouver area. The Globe has seen hundreds of cases in which homemakers or students were listed as registered owners on multimillion-dollar residential properties.

The new measure would make the exemptions available only to home buyers who are residents at the time of purchase.

The Globe’s investigation discovered these cases usually involve a wealthy breadwinner who earns their living in another country, while parking money in Canada, through buying residential properties. Some of the homes are used by family members; others are simply left vacant.

Several expert sources told The Globe there are two ways to exploit the system – to sell those properties and pay no taxes. In the first scenario, the breadwinner claims to be a non-resident of Canada and pays no taxes here, while their spouse and children buy and sell homes registered in their names. The homes are purchased with money received as a “gift” from the breadwinner. The homes can then be sold tax-free, because the family members claim to be residents of Canada, classify the properties as their principal residences, and therefore pay no tax when they sell.

There is more widespread abuse in a second scenario, according to experts. That is when the breadwinner claims to be a resident of Canada but then doesn’t report their worldwide income to the Canada Revenue Agency, as required by law. Because they claim to be residents, they can sell Canadian properties in their name, tax-free, even if they spend little or no time in Canada.

If these homeowners make their living in China, experts said it’s difficult for anyone to determine what they actually earn, because it’s next to impossible to get tax records from that country, even though China and Canada have a long-standing tax treaty. As a result, experts say, these wealthy people get away with claiming little or no income on their Canadian tax returns, while selling homes tax-free.

Tax accountants and lawyers who handle these cases told The Globe this can be done with multiple properties, primarily because the CRA doesn’t require any resident to report any sale of a principal residence. Taxpayers simply have to fill out a form, but keep it for their own records, instead of submitting that information with their taxes.

Experts have urged Ottawa to require taxpayers to report the sale of all homes, even if they are claiming the principal-residence exemption.

“Everybody’s biggest lifetime gain is from principal residence and [Canada Revenue Agency] is saying if you are a resident it is tax free and if you are a resident we don’t worry,” one Vancouver real estate accountant said Sunday. He spoke on the condition he not be identified out of fear of repercussions.

“So the CRA pushes them into residency claims. A wife and kid are allowed to stay in Canada as a resident and as such they are entitled to tax-free principal residence and as such they don’t have to report it.”

Mr. Morneau announced in June that the government was studying developments in the housing sector, with his department working with Canada Mortgage and Housing Corp. and the Office of the Superintendent of Financial Institutions while consulting with provincial and municipal officials.

In a bid to cool its hot housing market, British Columbia introduced a foreign-buyers tax this summer which applies to the sale of all residential properties within 22 communities of metro Vancouver.

The levy applies to buyers who are not Canadian citizens or permanent residents, and corporations that are either not registered in Canada or are controlled by foreigners, and adds $300,000 to the purchase of a $2-million home.

The CRA says it completed nearly 2,500 audits related to real estate in B.C. and Ontario between April, 2015, and June, 2016, and that the agency plans to do as many or more next year.

Source: SHAWN MCCARTHY AND KATHY TOMLINSON

OTTAWA and VANCOUVER — The Globe and Mail

Tagged , , ,

Syndicated mortgage a high-risk investment bet – analyst

Syndicated mortgage a high-risk investment bet – analyst

The emerging trend of syndicated mortgages for Canadian condominium units might appear to be convenient for would-be investors, but Maclean’s senior business and finance writer Chris Sorensen argued that the arrangement is a high-risk choice that might even upend the market in the long run.

A syndicated mortgage involves hundreds of individuals lending money—in some cases even as little as $25,000—to a developer “in exchange for a fixed annual interest rate of between eight and 12 per cent over a term of two to five years.”

The popularity of the set-up is such that in Ontario, it has garnered nearly $4 billion in sales in 2014 alone, the latest year with available numbers.

However, Sorensen noted that much of the money in a syndicated mortgage goes to expenses for the development and pre-sale of enough units to convince banks to provide financing. The analyst said that this presents the risk of buyers not getting their funds back should the deal go south.

“Even in a hot market like Canada’s, there are no guarantees a given condo project will get off the ground, regardless of how quickly buyers snap up the units,” Sorensen wrote in an April 4 piece published on the Maclean’s website.

“If something goes wrong with a project, syndicated mortgage investors are subordinate to banks and other primary lenders, meaning they’re further back in line for repayment—assuming there’s enough money left over after other lenders have received their share,” he added.

The analyst cited the observations of Toronto-based mortgage broker John Bargis in proving why the present wave of syndicated mortgages isn’t sustainable in the long run.

“I’ve been exposed to multi-million-dollar projects where things have gone bad really fast. It’s not because it’s not a viable project, but there’s just so many moving parts. You’ve got construction managers, contractors, builders—so many things that can go wrong from an investment perspective or a sales perspective,” Sorensen quoted Bargis as saying.

Despite the dour prospects, Sorensen acknowledged that syndicated mortgages would remain popular among enterprising individuals for the foreseeable future.

“The myriad risks explain why syndicated mortgages pay interest rates approaching double digits at a time when a five-year Guaranteed Investment Certificate, or GIC—a truly ‘safe’ investment—offers only 1.5 per cent annually for a five-year term,” he said.

Source: MortgageBrokerNews.ca by Ephraim Vecina | 13 Apr 2016
Tagged , ,