investment property

The Most Important Ways To Finance An Investment Property

Investment Property, the field of real estate investment is one of the most successful areas of investing money in which quite a few people work in many different countries of the world, where this type of investment is done by buying or building several real estate to sell or rent them to obtain Fixed financial return through it.

Where real estate investment is considered one of the good opportunities that can be exploited to achieve great financial gains, in addition to being one of the guaranteed means by which one can obtain a good income, and it is common recently that the owners of old lands and buildings start contracting with a real estate contractor from To build a large property, part of it is taken for housing, and the remaining parts are invested to obtain large financial profits.

Investment Property

investment property
investment property

Many owners of old land or real estate want to build an investment property to exploit this space to obtain large financial profits, because investment in real estate is one of the most important types of successful and guaranteed investment that many people work with, and real estate is divided into:

Residential Property

Residential real estate is the most common type of real estate, especially family homes,
where new homes are built with many different specifications through which to satisfy the desire of all customers, such as residential units, townhouses, and duplexes, in addition to three floors,
quadruple houses, as well as Vacation homes, and high-value homes, are being built.

Commercial Property

Commercial real estate is one of the types of investment real estate,
and it depends on building places that are used to be offices or retail stores, in addition to storage facilities, and investment in commercial real estate is more expensive than investing in residential real estate, where private contracts can be Commercial real estate is longer than a residential lease.

Industrial Real Estate

Industrial real estate is limited to buildings for manufacturing,
as these real estates are used for factory storage, in addition to places for distributing goods
to divide areas and deal with them correctly and differently

Ways to obtain investment real estate financing

There are many ways through which you can obtain financial financing
to start real estate investment, and these methods include the following:

Crowdfunding

Crowdfunding is one of the most common methods in the field of real estate investment,
as this method relies on collecting certain amounts of money from some people so that they are partners in this property, and the financial share that is paid is evidence of the partnership, and the profits generated from the property are divided equally among the partners 

Exploit seller financing

It is important when talking about an investment property to know this method,
as this method is one of the uncommon ways to obtain real estate financing, as this method depends on a person buying a property while retaining the right to finance from the person who sold the property to him, and this is done By agreeing with the owner of the property.

Rent out your primary residence 

One of the methods preferred by many people, and on the other hand, many of them do not prefer it either, but this method is considered one of the good ways to start, and it is done by sharing your house with one of the tenants, and the conditions necessary to implement this idea are set so that it is not There is harassment of tenants or homeowners.

Buying a small property ready for the investment process 

investment property
investment property

Some real estate properties meet certain conditions that lead to buying them to invest in them, and you can invest in them by renting them to shop owners or other business owners, and you must have the capital to be able to buy this property

and you can get capital Through a friend or relative,
in addition to the possibility of obtaining a financial loan from the bank to start investing, provided that the first payment is made after starting the investment. 

Leveraging non-investment properties 

If you own a non-investment property, you can use this property to take a financial loan
from the bank with the guarantee of this property to buy another property to start investing in.

Advantages of real estate investment 

An investment property, like any other investment, has advantages and disadvantages.
We will learn about all the advantages of real estate investment, as it includes the following features:

Maintaining the value of money in fixed assets

Real estate investment is one of the investment methods through which capital can be preserved
without being affected by fluctuations in currency rates and the many risks related to currencies if funds are entered in the form of financial liquidity, as real estate is far from these risks because it is a fixed asset that is not affected by any recession In the real estate market, it is therefore considered an abstract financial value that cannot be subject to loss.

Many types of real estate can be invested in, as the matter is not limited to buying
and selling residential apartments only, as it is possible to invest in commercial units and office premises, in addition to lands, and each of these types has a certain value,
and this value may increase with time, such as the price increase in the territory.

A stable source of income that does not require effort 

Passive income is one of the methods of income that is made through the individual obtaining money without making an effort. Investing in real estate is one of the types of passive income, where it is possible to buy real estate or any of its types and start renting it, and this method is preferred by a very large number of people because it will be a stable source of income for them without making any effort.

This method is considered one of the best investment methods for people who want to start investing with the money that they have saved, and this is a good feature of an investment property.

Investing in value increases with time

Real estate investment is one of the areas that you can never lose,
because in the worst case, you will get the amount that you paid for the property,
in addition to making a small profit, because the value of real estate increases in a continuous manner due to the strong demand for it by investors,
in addition to the increase in The demand in the rental market due to the significant rise in owning
or building costs, which helps to make renting easier and better for many people.

Read more: Reverse mortgage calculator and the benefit of using it

Quick profit 

investment property
investment property

After getting acquainted with the term investment property, it is important to get acquainted
with this important feature that many people who want to invest are looking for,
which is quick profit. You bought it or rented it because the real estate market is characterized
by constant movement due to the strong demand for it.

In this article, the term investment property was introduced,
in addition to the types of real estate
that can be invested in, and an explanation of all the advantages of real estate investment. 

Capital Mortgages specializes as a service-oriented brokerage that prides itself on integrity and maintaining a service level second to none in the industry.

How Do Capital Gains Work On Property Sales?

When entering today’s red hot real estate market, it’s easy to feel excited by the prospect of how much your home will grow in value in ten, five or even just two years. We’ve all heard stories of people who have bought a home for $400,000, only to sell it just a few years later for 50% more than what they paid.

While the prospect is exciting, it’s important to keep in mind that in Canada, 50% of capital gains are taxed. This is good news for those who own a single primary residence, but understandably an unfortunate factor for those who are looking to invest in more than one property at a time.

To put it simply, capital gains are the increase in the value of an investment – this term can be used when it comes to stocks, shares, exchange traded funds and in this case – real estate. A capital gain can be realized or unrealized, meaning that you either received this gain as a result of selling your investment, or your investment increased in value, but you did not sell it.

In the context of real estate, you do not have to pay capital gains on the sale of your primary residence. That means that if you bought your primary residence for $400,000 and sold it for $600,000, that $200,000 capital gain is yours to keep.

However, if you currently have a primary residence and purchased an additional home as an investment property, 50% of the value of any capital gains on the additional home will be taxable. This 50% in capital gains will be added to your annual income, meaning that the additional tax you pay that year will vary depending on how much you earned in a year.

Let’s say that the same $400,000 home that sold for $600,000 was your investment property and not your primary residence. 50% of the $200,000 you earned on it is $100,000 – which will be added to your annual taxable earnings. So if you earned $120,000 that year as a salary (with no other income sources), your taxable income for the year would now be $220,000.

While this can be disheartening for many, note that you can offset your capital gains for the year with any capital losses you had that year (realized or unrealized), until you reach zero. If you only have capital losses in a given year, the Canada Revenue Agency will allow you to offset a capital gain that you declared in the previous 3 years. You can also carry a capital loss forward into the future.

More questions about how capital gains work on property sales? Give us a call today at 613-228-3888.  

 

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