Ty Lacroix

    For decades, real estate has been one of the most reliable and dramatic wealth generators for millions of people - and despite the slump experienced in some recently booming areas, many parts of the country continue to experience price appreciation.

 Real estate markets with steady, solid growth present little risk to mortgage lenders, so it makes sense for them to loan money to investorson attractive terms.I know, all we are hearing for the last 9 months is about foreclosures and bank sales going on but this is an anomaly and not brought on by normal market conditions. This was brought on by greed, poor oversight and in a lot of cases, by fraud.And while banks may also loan money for other purposes, they are more willing to loan it to real estate investors because of the safety of the collateral.

   If for some reason the investor doesn't pay, the bank still has a physical asset that has significant value. Real estate will never go to zero (as many stocks have) because it is in limited supply, has universal demand, and is constructed from materials which are increasing in price, such as lumber, copper and stone.

      Additionally, real estate investors have more control over their investment than they would over stocks. Although stock investments have potential for lucrative returns, they are unfortunately afflicted with volatility and suffer unpredictably sharp price fluctuations that often have nothing to do with the quality of the company or the competence of its management.

To learn more about real estate investing in London Ontario, perhaps it is time to give mr a call at 519-435-1600.

This blog is a great reminder for landlords to properly check out your tenants before renting any of your units, being one or twenty. Not only a credit check but thoroughly check our their references.

This blog was written by Brian Madigan, a lawyer and REALTOR® and is a cautionary note on the tenancy act.

For further information and ways to protect yourself, I can be reached at 519-435-1600.

Most stock market investors will pay 100 percent of the share price for a stock (investors who don't mind the risk of margin calls can buy many stocks for 50 percent down), while real estate investors typically need to put down only five to 10 percent with no risk of margin calls.

 To illustrate, Investor "A" buys $100,000 worth of stock that appreciates an average of 10 percent annually. At the end of five years, Investor "A" would have stock valued in excess of $160,000 - a gain in excess of 60 percent.

 Likewise, Investor "B" invests $100,000 in real estate. With 20 percent down, Investor "B" now controls real estate worth $500,000. Investor "B" maximizes leverage by obtaining an interest-only loan and with the property appreciating at six percent per year, after five years the $500,000 property is now worth $670,000.

That $170,000 gain is a result of investing only $100,000 and is therefore a 170 percent return-on-investment (ROI) compared with the stock investor's 60 percent ROI.

 In addition to tax benefits, the real estate investor can also rent the property, resulting in monthly cash flow - something even dividend-paying stocks and interest-paying bonds usually can't match.

The practical investor recognizes the benefit of investing $100,000 and potentially earning $170,000 over five years in real estate, versus earning only $60,000 in the same time with the same investment in stocks.

In reality, the stock market does not go up every single year while real estate often does, so that the above comparisons are even more skewed in favor of real estate. And if real estate does decline for a year or two, is that the end of the world?

When investing in real estate, work with all the numbers and if you really want to know the correct numbers to use, work with a quality REALTOR®

The majority of tax benefits associated with investing in real estate is fairly straightforward. One of the best tax incentives is depreciation that applies to a whole variety of investment properties, including rental houses, apartments, condominiums and commercial buildings.

This is the second of a series called "Why the Real Estate Market Tops the Stock Market" Depreciation is essentially a "paper loss" for wear, tear and obsolescence - and a big tax incentive because it generates tax savings with no out-of-pocket costs. Those who qualify are entitled to many additional tax deductions such as property taxes, mortgage interest, insurance, maintenance and repairs.

Real estate investors can sell their properties without paying capital gains taxes as long as they exchange them for others of like kind.

To summarize, sell stock in which you have a gain and you'll be paying taxes - there's just no way around it. But sell appreciated property and if you do it right, you can defer your tax indefinitely.

 The tax benefits written here are particular to our federal and provincial tax regulations. Check with your friendly accountant or invest 5 or 6 hours and research what you can do and can't do. It also should go without saying that there is a lot of free advice out there, just be sure you know where it is coming from and what are the motives of the free advisor?

Remember, there are paper profits and real profit in your pocket. If you find a grocery store that will take paper profits at the checkout, I may have a bridge for sale, it is in Brooklyn and have I got a deal for you!

Real Estate Investor or a True Investor?

 As a real estate broker of record and owner, I meet plenty of people who, when the subject comes up, mention that they are real estate investors. The conversation will go on for a bit, and I typically classify the person in question as either a true investor, or a real estate "investor."

True investors typically have a number of transactions under their belt, realize that they're still learning, and are open to any insight I can provide - and I am always open to their insight. The real estate "investor" typically has never actually taken the leap and bought a property purely for investment, doesn't realize the difficulties of real estate investment, and proceeds to overwhelm me with their "expert knowledge." What they should do, is listen.

1. It's not as easy as it looks on TV

"Flip This House" is a fantastic television program - that's about as realistic for the average investor as "Sponge Bob Square Pants." The problem with TV real estate investment programs is that they downplay the work involved, and accentuate the money made by the investors. "Flip This House" will show you a tidy $150,000 profit wrapped up in a 30 minute episode. What they're not showing you is the work done to find the property under market value, build the industry relationships necessary to tackle a sizeable project, the skills necessary to manage that project, and the market knowledge to accurately predict that properties final sales price. Bottom line is: investing is hard. It can be, however, very lucrative.

2. Walk before you run.

So many "investors" decide one day that it's time for them to make millions in the market, and begin looking for that perfect flip, or perfect rental property - with a hefty price tag. Would you walk out of your door today to run a marathon without training? Absolutely not! Investing is very similar. There are MANY mistakes you can make, and one big mistake can turn an investment sour. The best way to minimize your risk is to start out small, and reduce your variable costs. If you're buying an income producing property, purchase one that's already rented out - preferably to long term tenants. That way, you can do research on a tenant's credit worthiness BEFORE you've taken the leap and bought the property. You'll also know exactly how much cash flow your new property will generate. If you're buying a rehabilitation project, it's often the carrying costs that can overwhelm a new investor. If, at all possible, buy your rehab project as your home - that way you can take your time without paying the consequences. If that's not possible, then build in PLENTY of carrying costs - around 6 months worth. Once you have a few investments under your built, you'll be able to accurately predict your variable costs, keep them lower, and make more profit.

3. For Long Term Wealth - It's a Marathon, Not a Sprint.

Many new "investors" like the model of "buying old houses and fixing them up." This seems to be the easiest way to make money, but it's not. Flipping houses takes skill, foresight, market knowledge, and market resources. Furthermore, flipping houses is hard work, and results in short term capital gains. The true path to long-term wealth lies in income producing properties. Purchase an income property in a market you think will appreciate, hire a property management company, and forget about it. Let the cheque come in the mail once a month - this "mailbox money" will turn into your best friend. After you've let the property rent for 3, 5, even 7 years, check its value and you should be pleasantly surprised! The key here is that you didn't have to put in very much work - you merely found a great property in an appreciating market, and let a passive investment earn big returns.

4. Use a Realtor You Trust - And Don't Go After Their Commission.

Author Robert Kyosaki says, "Corporations have boards of directors. You should have one, too." Good Realtors earn a sizeable income - and they're worth every penny. The keyword here is "Good" because the real estate industry is like any other - there are plenty of bad agents. Don't hire any agent that crosses your path; Make sure and interview plenty of Realtors and find one that works with investors, and personally invests. When you find your "Realtor Advisor" don't go after their commission. Any good Realtor will have plenty of clients and you want to make sure that you're not playing second fiddle to them.

5. Put Together a Business Plan, and Stick to It

The only time you can't POSSIBLY lose money is before you invest it. That's why putting together a solid business plan is the smartest action step you can take. Decide the type of property you plan to buy, what it will cost to purchase it, what it will cost you to hold the property, and how much income the process will produce for you. Most investors have a "formula" for buying properties - develop, borrow, or steal one. Write EVERYTHING down on paper and analyze every possible expense. Plan for the worst and anticipate how you will avoid the worst. Once you've put together your business plan and investing "formula" - Stick to it!!! Execution is key to successful investing.

6. When You See Something That Looks Good - Take Action!

I've worked with many investors that have excellent business plans, and great formulae, but who refuse to pull the trigger on something that looks good. There are MANY ways to back out of a contract, and if you hesitate when you see a good deal - another investor will already have tied the property up in their contract.

7. Try and Talk Yourself Out of the Deal

After you've put together your business plan and contracted a property, you need to look at every negative aspect of the property. Plan for the worst and hope for the best! Oftentimes, planning for the worst involves walking away from the transaction. After you've invested the time finding the property and the money to contract and inspect the property, you might feel emotionally invested. However, don't let these feelings get in the way of making a smart financial decision. If you look at every possible negative that can happen in the transaction and you will still make a profit, then go for it. You can always minimize the negative variables. However, if the worst does happen, you will still have all the clothes on your back. No matter how hard it is, if it looks like you COULD lose money, walk away.

There's big money in real estate investment, and there's the potential for big losses, as well. Someone giving themselves the title of "investor" far from makes them an actual investor. Before you take the plunge, talk to plenty of educated investors with experience, and follow these simple steps.