Tag Archives: investing 101

Court orders developer to reveal condo-flipper info

THE CANADIAN PRESS

A Federal Court judge has approved at least one court order that will require a British Columbia developer to turn over information to tax officials about people who bought and flipped condo units before or during construction.

And several similar applications are under way, reflecting the federal government’s efforts to crack down on potential tax cheating in the presale market.

A July 25 Federal Court order requires the developers of the Residences at West, a Vancouver condo project at 1738 Manitoba St., to provide the Canada Revenue Agency (CRA) with documents related to presale flips, also known as assignments, in the building, including proof of payments and correspondence between the developers and people who buy the assignments.

That order followed a June 29 application from the federal government.

In September, the Minister of National Revenue applied for court orders related to One Pacific, a Concord Pacific project, and Telus Gardens, a downtown project developed by Westbank Corp.

Both developers said they would comply with the request for documents.

“Customer information is protected by privacy laws and is not at the developer’s liberty to disclose unless ordered by the Court,” Matt Meehan, senior vice-president of planning at Concord Pacific Developments Inc., said in an e-mail.

“To protect our customers’ information and ensure any release will be compliant with the law, we have asked CRA to obtain a court order, which we will adhere to.”

In an e-mailed statement, Westbank said it would comply with the minister’s application.

The CRA is investigating potential tax cheating in the presale market.

Developers presell units in projects to obtain bank financing. Those sales agreements can be “assigned,” or flipped, to somebody else before the building is finished.

A unit may be flipped several times before a project is completed. But only the transfer of legal title from the developer to the final purchaser is registered with the B.C. land title office.

That means the CRA does not know the identities of any buyer but the final one, and has no way to check whether the others have paid applicable taxes on those transactions.

The provincial government last May announced new regulations designed to limit assigning: Sellers have to consent to the transfer of the contracts, and any resulting profit must go to the original seller. But those new rules apply to single-family homes, not condo presales.

As the CRA heads to court to obtain data on presale buyers and sellers, some observers say the provincial government could cool speculation in the presale market – and support federal tax-enforcement efforts – by changing reporting requirements.

Presale purchasers may include people who are not Canadian residents and whose profit from flipping a presale contract would be subject to a federal withholding tax, said Richard Kurland, a Vancouver immigration lawyer.

He used the example of a person from Iran who buys a presale contract for $100,000 and sells it for $125,000 a month later. Under the Income Tax Act, that profit – because it went to someone who is not a tax resident of Canada – would likely be subject to a 25 per cent withholding tax, he said.

“If nobody knows that you’re from Iran and not a tax resident, and nobody withholds the money, you just walked off with $6,000 tax-free,” he said.

If information on buyers’ identities were routinely provided, the agency could more readily check to determine if, for example, anyone was claiming the principal-residence exemption on more than one property, Mr. Kurland said.

Asked if the CRA would like the province to make changes such as requiring routine disclosure of the identities of presale buyers, agency spokesman Bradley Alvarez said in an e-mail that, “any additional information, including that obtained from other governments and third parties, enhances the CRA’s ability to detect non-compliance.”

The CRA has found some flips are reported incorrectly or not at all and “the CRA welcomes any endeavours to obtain any information that can assist the Agency in detecting non-compliance.”

Developers support the CRA’s goals, but have to take privacy regulations into account, said Anne McMullin, president of the Urban Development Institute.

“It’s not the developers not wanting to hand over information, it’s, ‘Let’s do this safely,’ because of privacy laws,” Ms. McMullin said.

The NDP, which came to power after the May election, had said while in opposition that the Liberals were not doing enough to curb speculation in B.C. real estate.

In its election campaign platform, the NDP promised to set up a multi-agency task force to fight tax fraud and money laundering in the B.C. real estate marketplace.

Finance Minister Carole James was not available for an interview.

In a statement, her office said the province is monitoring the federal government’s court action, and tax fraud is “something that is taken very seriously.”

The B.C. government is working on a comprehensive housing strategy, and any policy or legislative changes will be made public once that strategy is developed, the statement added.

 

Source: The Globe and Mail –  AND 

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Pay less tax on rental properties

Q: I have five rental properties in my name. Should I switch them to a numbered company?

–Travis

A: Hi, Travis. Incorporating a holding company to own rental properties has some advantages and disadvantages depending on the objectives you have in mind in both the short and long term. However, you should first speak with a tax accountant about any tax ramifications both personally and corporately to ensure as perfect an integration of the two systems as possible. Then speak with a legal advisor to draft up the appropriate corporate structure before making the transfer.

From a tax point of view, there are two things to consider. While the transfer of real property held personally should qualify for a Section 85 election to rollover the properties at their cost base, you will want to be sure the CRA will not consider your properties to be held as “inventory”; that is property, held primarily for resale rather than rental. If so, they will not qualify for a tax-free rollover or capital gains treatment. Therefore, the transfer could trigger unexpected tax consequences. Your history of receiving rental income from the property will help you avoid this.

Second, you’ll also want to understand the difference in taxation rates both inside and outside of the corporation. Recent tax changes may have made it less desirable to own passive investments inside a corporation, depending on where you live in Canada.

Some advantages of incorporation include limited liability and creditor protection. However, if you are holding mortgages, most financial institutions will still require personal guarantees. Corporate directors and officers can also be held liable on default, so proper insurance protections for these instances is critical.

From a retirement planning point of view, incorporation may provide more flexibility as to when income is taken as dividends. It could help you to avoid personal taxes or spikes into the next tax bracket, and benefit from the recovery of refundable taxes in the corporation.

Consider also that there will be costs for setting up and annual reporting of the holding company. Transferring the properties from the taxpayer to a holding company may have tax consequences, other than income taxes. If your province has a land transfer tax (or equivalent), you may have to pay the land transfer tax when the properties are transferred.

The bottom line is this: you’ll want to be thoughtful about the transfer, and you’ll want to match your investment objectives and desired tax outcomes as closely as possible.

Source – MoneySense.ca – Evelyn Jacks is a tax expert, author, and founder and of Knowledge Bureau in Winnipeg

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Five ways to maximize your investment property

Wasim Elafech of Century 21 Bravo Realty in Calgary is among the banner brokerage’s top sales agents in the world. Century 21 operates in 78 countries with over 100,000 agents, and Elafech managed to become their number one unit producer in 2015 and number three in Canada last year, so he knows a thing or two about getting the best bang for your buck out of a rental property. He shared some of those tips with us.

1. Maintain the property
Elafech says some he’s sold properties to clients who in turn rented them out, but without putting in the necessary work. “The work you do doesn’t have to be expensive, but it has to be brand new,” he said. “It will be liveable but it won’t look good. The floors will be cracked or peeling, and when people walk in they get the impression it’s a rundown property, but they won’t if you do the work. Make sure all the fixtures work, that they’re not broken; make sure door handles are loose or need to be replaced. If the place is well-maintained, 100% of the time you’ll get more money for your rental.”

Elafech added that properties are often reflections of the people who live in them.

“A really good tenant won’t look for a rundown place, first of all, so they wouldn’t take that place. You’ll attract the type of people your property looks like. People who accept living (in shabby properties) aren’t the best tenants.”

2. Bungalows yield higher rents
Bungalows are excellent rental properties because the top and bottom floor can be rented out as separate units. “One guy I know pretty much made his whole house different rooms with a common living room, couch and TV.”

Typically, however, the upper and lower floors of a bungalow can be rented as separate units. “Bungalows are the easiest houses to sell in certain areas here because you can rent the upper and lower levels, if it’s properly treated. In an area where you’re renting a whole house to a person, you’d get, say, $1,600 a month, but if you’re renting the floors separately, you can get maybe $2,200 a month. It’s about volume.”

3. Screen your tenants
Screening tenants adequately ensures your rental investment doesn’t become a nightmare.  “I see it a lot,” said Elafech. “They don’t want to lose a month on the mortgage payment, so if it’s been sitting for a couple of weeks they’ll rush into a deal and rent it to whoever comes next, and sure enough the people either do a midnight run or don’t pay. I’m going through that now with my client.”

Elafech recommends waiting it out, even if that means the property sits empty for a month or two. Ask tenants for references and their job history. “If the tenant is reluctant, there’s usually a reason. Keep a look out for red flags.”

He also suggested hiring a rental management company if an apartment building, rather than two or three properties, needs to be maintained. While pricey, they’re well worth it – and they screen tenants.

Sometimes, though, less is more.

“I have a client that’s renting out a house with a garage for $1,000 month that usually goes for $1,800, because he has a good tenant. He cuts the grass and maintains the property. He does everything for the landlord, so that peace of mind is worth more than the money he’d get from renting the parking pad and garage in the back.

4. Rent the garage and parking spot separately
Elafech mentioned a rental property he’s currently showing. “The owner is going to park his trailer on the parking pad, rent out the garage and both floors of the bungalow separately – rental income from upstairs, downstairs and the garage.”

5. Location, location, location
Location is everything in real estate, so Elafech recommends investing in a property that’s surrounded by prime amenities like transit and schools.

“In Calgary, we have LRTs and buses. Even having shopping centres and schools nearby is important. A client had a condo with an LRT across the street, and he got more for it than a similar place he owns that had a similar layout but was a bit bigger, because it was six or eight blocks away and farther from the LRT. In Calgary, when it’s minus-40 outside, you’re not walking, or waiting for a bus when it’s cold. People pay for convenience.”

Source: Canadian Real Estate Wealth – Neil Sharma

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Reporting the sale of a rental property

Q:  I bought a house in 2010 for $600,000 and lived in that house as my principal residence until 2013.  Then I bought and moved into another property. I rented out the first house and reported all income on my tax returns. In 2016, I sold the rental property for $900,000. When I file my tax return for 2016, how much capital gains am I supposed to declare and report to the CRA?  Is it $900K minus $600K, minus the cost of disposition; or $900K minus whatever the deemed fair market value of the property at the time when I moved out in 2013, minus the cost of disposition?      

— Wallace, Toronto


Ayana Forward is a Certified Financial Planner with Ryan Lamontagne Inc. in Ottawa: 

You are entitled to a principal residence exemption for the time you lived in the residence—between 2010 and 2013. The formula for calculating your principal residence exemption also includes an extra year so you will have four years of exemption according to the formula.

The formula is as follows:
((# of years home is principal residence + 1)/# of years home is owned) x capital gain

Your capital gain before factoring in the principal residence exemption is your proceeds of disposition ($900,000) minus your purchase price ($600,000), which works out to $300,000.

Using the above formula, your principal residence exemption is:

((3 + 1)/6)  x $300,000 = $200,000

Your capital gain after factoring in the principle residence exemption is $100,000 (as $300,000 minus $200,000 = $100,000). Because it’s a capital gain, the CRA will only charge you tax on 50% of that gain, resulting in a taxable capital gain of $50,000.

The amount of tax you pay on that $50,000 will depend on your marginal tax rate.

To report the sale and tax owed, you must complete form Form T2091(IND) Designation of a property as a Principal Residence by an Individual (Other Than a Personal Trust) and file it with your income tax return.

Source MoneySense.ca –  Ayana Forward  is a real estate investor who also holds the Certified Financial Planner (CFP®) designation. Ayana is fee-based Financial Planner with Ryan Lamontagne Inc in Ottawa, ON.

 

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Real Estate Investing, It Isn’t Just for the Boys Anymore

When 51 year old stay-at-home mom and part time piano teacher Gena H. from Washington State woke her husband up at 1:15 AM and said “I want to be a real estate investor,” he patted her on the shoulder and said, “that’s nice dear.” In the morning he shared all the reasons he believed it could not work for her. Fast-forward a few years and Gena, who obviously didn’t listen to the husband she adores, is a successful and very profitable investor. She has in her words “dramatically changed the financial course for me and my entire family.”

Stories like these are coming to my attention at a rate like I’ve never seen in my well over 20 years of investing. I’ve been fortunate to watch countless people go from real estate observer to successful real estate investor. But never before has there been such a massive wave of women taking ownership of the household finances using real estate.

In watching this transition, I believe it’s due to a couple of primary factors. First, we all know that the real estate market peaked like never before around 2006, and then the bubble burst and the market crashed. It reminded me of flying down Space Mountain in Disneyland. However, after the bottom comes the inevitable shift in the market, when it begins trending back up as we are seeing now. This is truly a magical time for investors.

Second, I think we are heading into the years of more empowerment of women. I could be criticized for saying this, but I think it’s less about women’s liberation, as that was yesterday’s news. I see it as more that women are just losing any hesitation at all to do anything they want. I think it’s a very positive trend for our country. I watched my single Mom struggle to support my sister and me growing up, so I’m always cheering for the ladies. I think we are entering a whole new era of advancing equality. But that’s for another story.

Jen G., a single Mom, was working in an accounting office with no windows and too little pay each month to support her and her son. Frustrated, stressed and wanting a new path in life, she decided to reinvent herself through real estate investing. Friends and family told her real estate investing was for people with money and experience. Some even expressed resentment and actively discouraged her. Recently, Jen called to tell me: “Just six months after starting, I got to walk into my office and tell my boss I no longer needed her services!” Jen quit her job and has done more than 185 real estate transactions so far and feels she is being the Mom she always wanted to be.

Tammy R. lives in a crazy fast moving market in CA. This is a market where even seasoned investors are afraid to take the plunge. However, this determined Mom of four, who was homeschooling her children when she started investing, refused to yield to her fears. She didn’t listen to her husband who said “it won’t work for you.” Like Jen, she didn’t have a ton of money to start, but researched a method called “wholesaling.” Wholesaling is matching up monied investors with good deals, and making money in the middle. On one transaction alone she made more then she did the prior two years, and she is currently working on her 23rd deal. “You just can’t let the naysayers spoil your dreams” she said when asked about the secret of her success.

Whether you’re in a strongly rebounding large urban market like Tammy, a more rural and smaller city in Alabama that’s coming back at a slower pace like Jen, or somewhere in the middle like Gena in Washington State, it doesn’t matter. The current state of all of these markets is opening up endless opportunities for investors to gain the knowledge to profit and who aren’t afraid to go for it.

Real estate is my life, and with over 20 years of non-stop investing I’ve personally experienced that there is always a profitable strategy that fits the current market cycle. However, the massive spike in real estate, followed by the inevitable and dramatic crash, is setting up a solid rebound. I truly believe this is the greatest time for everyone who would like to secure a better future to get educated, learn from those who are doing it, and jump into real estate investing.

I’m currently doing 30 to 50 deals every month all around the country, in 9 states actually. I’m working with women like Gena, Jen and Tammy, as well as a slew of others who are crushing todays shifting real estate market rather then complaining about it.

Maybe real estate investing is cooler and more possible then you think. All I can say is that the boys better step up.

Source: The Huffington Post 07/12/2013 –   Dean Graziosi

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Woodstock poised for revival as new generation moves in

The White Dove Rockotel is awash in an aesthetic that is psychedelically retro, yet ultramodern in accoutrements

Jorma Kaukonen wasn’t onstage at the Woodstock Playhouse but a half a minute when he referenced an event nearly 47 years in the past. “I can’t believe I get to play Woodstock again,” says the singer-guitarist, a member of Jefferson Airplane when those white-rabbit believers played the Woodstock Music & Art Fair back in the day. The crowd in front of him look to be of flowered-hair vintage. Once far out, they are only far along now.

Woodstock, the upstate New York town that’s a lovely place of white churches, quaint shops and a fortuitous association with an iconic pop-culture moment, doggedly flies its freak flag.

Kaukonen himself is an acoustic folk-blues specialist and handsome, roguish septuagenarian. He starts his show with Ain’t in No Hurry, about the setting season and an inclination not to rush, even though a train is coming his way. He’s entitled to his complacency, but there’s a feeling among some of the townspeople that maybe it’s time for the old Aquarians to step aside.

IF YOU GO

Woodstock, N.Y., famous for its bohemian tradition and association with the festival that bears its name, is gentrifying. Here are a few places for food, lodging and music that celebrate the past while embracing the future.

Where to stay

The White Dove Rockotel, 148 Tinker St., Woodstock, N.Y.,thewhitedoverockotel.com. Rooms from $145 (U.S.).

Where to hear music

Bethel Woods Center for the Arts (a performing arts centre and museum located at the site of the original Woodstock festival), 200 Hurd Rd., Bethel, N.Y., bethelwoodscenter.org.

Where to eat

Phoenicia Diner (a Wonder Years-era eatery with modern twists, serving tourists, long-time residents and hipsters alike), 5681 Route 28, Phoenicia, N.Y., phoeniciadiner.com.

“The new generation is intent on this town not dying,” says Erin Cadigan, part of what she calls Woodstock’s “new blood.” She and her husband are escaped Brooklynites who own and operate the White Dove Rockotel, a funky Victorian inn awash in an aesthetic that is psychedelically retro, yet ultramodern in accoutrements that include high-speed WiFi, streaming TV and a Nexus 7 tablet with cyber-concierge services.

Students of history and hippiedom know that the actual music festival in 1969 took place a 90-minute drive across the Catskills in Bethel, N.Y., where three days of peace, love and music happened on the verdant fields of Max Yasgur’s dairy farm. And while the town of Woodstock has been milking the iconic event ever since, the rock-and-roll landscape of one of the most famous music towns in the world – once home to Bob Dylan, the Band, Van Morrison, Maria Muldaur and the folk-music impresario Albert Grossman – has dried up over the years.

Now, a reversal is afoot. It’s 2016, and Woodstock is ready for its reboot.

“The local music scene is really beginning to flourish again,” says Jimmy Buff, program director of Radio Woodstock, 100.1 on your FM dial if dials were still a thing. “People are looking for a place where they can do what they love and live affordably and still have access to New York City,” Buff explains. “That spot is increasingly becoming the Hudson Valley, and the northern migration of musicians is pretty amazing.”

One of the incoming musicians is Canadian expat Carl (A.C.) Newman, who, like Cadigan and others, left Brooklyn for idyllic wilds. The new breed rubs shoulders with the tie-dyed set. The Lovin’ Spoonful’s John Sebastian is still around – “I saw him last week at lunch,” Buff says – as is Woodstock organizer Michael Lang and the Band’s Garth Hudson.

The White Dove’s Experience suite is a deeply purple space with oblique Jimi Hendrix allusions.

Buff touts nearby towns such as Kingston and New Paltz as music hot spots, with sleepier Woodstock still in the early stages of its own revival. The White Dove’s Cadigan, a fashion designer and concert poster artist, is part of an incoming crowd of live-music boosters hoping to revitalize the scene. The inn offers free tickets to performances at the Paul Green Rock Academy – a school dedicated to the training of young rock musicians – and exclusive VIP packages with local music venues.

“Woodstock the town didn’t become the town because of the festival,” Cadigan says, speaking about an artist-colony heritage and free-spirit lineage that go back a century at least. “That festival became that festival because of the town.”

For my visit to the area, I stayed in the White Dove’s Experience suite, correctly billed as “750 square feet of psychedelic awesomeness.”

In line with Cadigan and her husband’s mission to celebrate Woodstock’s legacy while dragging the town out of the past, the deeply purple space shares silicon-age amenities and excellently oblique Jimi Hendrix allusions.

Over the fireplace in the living room hangs a print of the sound-wave visuals of the notes of the wild version of The Star-Spangled Bannerthe guitarist played at the festival. You can’t see it when the giant screen for the projection TV is unfurled. The kitchen wallpaper utilizes the sames symbols that once emblazoned Hendrix’s guitar strap.

A shop in Woodstock, NY that plays off the legendary music festival. (Ulster County Tourism)

With a white-fur rug here and a brass bed over there, the suite’s style is a mix of thrift-shop Americana and baroque mod – chic, brash and eye-poppingly evocative.

“What would this space look like,” Cadigan says, explaining her ambitious design motivations, “if the musician inhabited it?”

Other suites are homages to Joni Mitchell and Janis Joplin, while a Grateful Dead-edicated cottage – the only space in which pets are allowed – comes with a 40-inch flat screen with surround sound, along with a record player and original vinyl.

Back at the Woodstock Playhouse, Kaukonen finishes with his signature song, Genesis, an elegant rebirth reference. “Time has come for us to pause and think of living as it was,” he sings. “Into the future we must cross – must cross.”

It’s a gentle and wistful suggestion to live again as one did “when breathing felt like something new,” and it is a warning against keeping to a “vaulted well.”

Woodstock, it appears, is getting the message.

Source: BRAD WHEELER WOODSTOCK, N.Y. — The Globe and Mail Published Thursday, Jun. 23, 2016 2:32PM EDT

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Mike Holmes: How to control mould in your home, whether it’s visible or not

If mould in your home covers an area more than 10 sq. ft., or if there’s sewage involved, bring in a professional remediation company. Any surface with over 10 sq. ft. of mould should  be cleaned by licensed professionals.

Mould can present a serious health issue and it can also eat away at building materials, insulation and support structures. Unfortunately, homes and the materials inside them can provide the right food source and the right conditions for mould to grow. It’s important to know what to do if you detect mould in your home.

Mould needs an organic food source to grow, such as drywall, wood, paper, carpet, grout, wallpaper and fabrics — the kinds of materials you find in most homes. It also needs moisture and warmer temperatures.

Areas in the home where mould tends to grow include the basement, bathrooms, walls, ceiling corners, the attic, crawl spaces and on windowsills. If you live somewhere humid, the garage can also be place for mould to thrive. When you do your seasonal maintenance, make sure to check these areas for mould.

There are thousands of different types of mould. It can be green, black, yellow, white, even pink and, depending on the conditions, a single type of mould spore can be any number of colours.

It’s extremely difficult for homeowners to detect what type of mould is growing in their home and whether or not that type of mould poses a danger to their health.

A lot of people are sensitive to mould spores; they may trigger allergy and asthma symptoms when inhaled. Typically, the mould found in homes is not toxic, but it can still present a health risk. There’s no real standard for a mould level that is ‘OK’ or ‘safe’ — every individual reacts differently to mould.

According to a Mayo Clinic study conducted in 1999, 93 per cent of chronic sinusitis cases were attributed to mould. Children, the elderly and people with weakened immune systems may be more sensitive to the effects of mould exposure. If anyone in your home is experiencing headaches, sinus problems, sore throats or other respiratory symptoms, speak to your doctor. The cause could be mould.

If the mould in your home covers an area
more than 10 square feet, or if there’s sewage involved,
bring in a professional remediation company.

In most cases, you can tell if your house has mould by its musty smell and black stains. Other signs include water damage and black mould around baseboards, walls and ceilings. If there is a musty smell in your home but you can’t see any stains, mould could be behind your walls. In that case, I recommend having a certified professional home inspection done that includes thermal imaging, and possibly an indoor air quality assessment that includes mould testing.

If you find a small amount of mould that covers an area 10 square feet or less, you can typically remove it yourself. Use a solution of strong soap or detergent and water. I use a product that is non-toxic, anti-microbial, requires no scrubbing and kills mould at the root, not just the surface. Whatever you use, remember to wear the proper protective gear, such as goggles or safety eyewear, a mask and gloves, and keep the area well ventilated. And do not use bleach! Not only is bleach toxic, but the mould will come back anyway.

If the mould in your home covers an area more than 10 square feet, or if there’s sewage involved, bring in a professional remediation company.

If you bring in a professional, do your homework and ask the right questions. What are their credentials? What training have they gone through? What kind of professional accreditation do they have? Do they have references? Mould remediation is a fairly new industry, and like anything new, it’s the frontier. To make sure the job will be done right, find someone with Institute of Inspection Cleaning and Restoration Certification (IICRC).

The best way to get rid of mould is to control the moisture in the house and remove the mould. It could be something you can remove yourself, or you might have to bring in a professional. If you’re not sure, hire a professional, because when it comes to your health, it’s not worth the risk.

Source:  Mike Holmes, Special to National Post | May 28, 2016 | Watch Mike Holmes in his series, Holmes Makes It Right, on HGTV. For more information, visit makeitright.ca.

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