1 – Leverage

Leverage is defined as the use of borrowed capital to enhance the earning potential of an investment, and investment real estate is an ideal vehicle for capitalizing on the power of leverage. Unlike other investments, real estate is a tangible or hard asset that makes financing more readily available. Significant wealth can be built with investment real estate because your potential returns are substantially magnified versus a non-leveraged investment. Real estate has been the key to financial success for many of the more wealthy people in the world, like Trump, Bentall, Reichman and Hilton. As Trump has said, “It’s tangible, it’s solid, it’s beautiful. It’s artistic, from my standpoint, I just love real estate.”

 

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2 – Other People’s Money

Another key benefit of investment real estate is the ability to use the rental income you earn to pay down your mortgage financing. No other investment vehicle offers this. Rental income will often be sufficient to offset your mortgage payments AND the expenses associated with your unit. The Cobblestone Investments team of professionals are well positioned to find the properties that offer this level of potential cash flow.

 

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3 – Appreciation

Strategically selected investment real estate is a powerful vehicle for wealth creation over time. In fact, 39 year history collected by the Calgary Real Estate Board (CREB) shows that on average Calgary real estate appreciates by 8.75 percent per annum. When combined with the power of leverage, even at conservative growth rates, investment real estate held over a period of time can be the most effective way to build wealth. Mortgage financing is reduced nominally through regular mortgage payments, while the property value appreciates. The result is increased equity and increased wealth.

 

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4 – Tax Benefits

Taxes owing on the appreciated value of your investment real estate can be deferred until you sell the property. This simply means that value appreciation can grow tax-free year after year, giving you the benefit of tax-free compound growth. And when you do sell and trigger a capital gain, you will benefit from the capital gains status of this profit; meaning that 50 percent of your capital gain is taxed at your marginal tax rate, while 50 percent of the gain is tax free! This tax free profit can add up very quickly on multiple properties.

There are also many tax deductions associated with owning investment real estate. For instance, mortgage interest, property taxes, property management fees (if applicable), repairs and maintenance and other related expenses can be deducted from your gross rental income, thus minimizing the amount of tax you will pay.

Tax free equity take-outs through refinancing offer an additional key benefit to owing investment real estate.

* Be sure to always consult an accountant or lawyer for more detailed information

 

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5 – Income You May Never Outlive

The cash flow you receive from your investment real estate will increase through incremental decreases in mortgage financing over time, thus creating a growing income you may never outlive. Additionally, investment real estate offers a renewable source of capital, through re-financing options as property values increase and mortgage financing decreases. This is an extremely effective supplement to the potential diminishing capabilities of an RRSP in your retirement years. Investment real estate also allows you to create a legacy that will benefit both your children and grandchildren.

 

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