Real Estate Insider: April 2019 News Report

Happy Easter Weekend! Before you put all of your eggs in one basket, read some of these reports we found useful for making real estate decisions.

If you aren’t debt free going into retirement, you may have considered using your investments to pay off your mortgage. But is that the best retirement strategy? This isn’t simply a “Yes or No” question, there may be more things to consider than you thought. This article is a good place to start if you’ve been contemplating which route to take to retirement. >>

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Solar is the energy of the future without question, yet is buying a house with solar panels worth it today? It all depends on the company and the contract they have! Read here how solar panels on the roof ended up costing this couple more! Would helping the environment be worth a few extra dollars each month? We will let you decide! >>

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Ever heard of smart wood? This BC company is tired of the damage concrete is doing to our environment, and has developed wood that is stronger, lighter, and more soundproof than concrete. Read here more of the benefits of this timber over concrete.  >>

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Living mortgage free is a dream most have, but is pre-paying on your mortgage payments a good way to accomplish this? This article breaks down why pre-paying may not be all it’s cracked up to be! >>

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Buying your dream home might not be the best idea if you want to live your dream life! Don’t just take our word for it, read here why if this couple could go back in time, their “Dream Home” might have been crossed off their list of priorities. >>

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If you are selling your house and you want top dollar, the first thing you should do is call Team Lalovich! The second thing you should do is read this article for 5 tips on staging your home to attract the most buyers! >>

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Housing shortages is a major problem that Ontario is facing; this group has an easy solution! Your move Doug Ford. >>

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What was your reason for your last move? Do you fit in with the majority? The answer might surprise you, find out here! >>

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“2 Years of Home Ownership – The Good, The Bad, and The Ugly” >>

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If you’re contemplating ways to make passive income, this article is for you! Especially if AIRBNB is one of those contemplated ways. >>

Investing In Real Estate – Building The Right Team #8: General Maintenance Professionals

Just like at your principle residence, general maintenance items must be done to ensure the property is safe and well maintained. This is general labour type maintenance such as grass cutting, landscaping, snow removal & cleaning of common areas (if in a multi-unit building). Today we are going to elaborate on this subject and discuss a few items you should be aware of.

Can I do this general maintenance myself?

You certainly can get your hands dirty and tackle these items yourself, as long as you have the time and will be completing them on a timely basis. Saving money on these items will certainly increase your cash flow but make sure to put a value on your time. Don’t let the place go in between visits, as poor curb appeal or lack of general maintenance can be a large turn off for tenants and can negatively affect your occupancy rates and rental rates. Maybe you want to start with handling these items yourself when you are just getting started, but as you progress as an investor, and as your portfolio grows, it may be prudent to outsource some help.  

If I hire out my general maintenance, who should I hire?

Grass, landscaping and snow removal can usually be done by a local landscaping company. You can consider hiring your tenant or a tenant in your building to handle these items, but beware of the pitfalls. Especially with snow, if they don’t do their job in a timely manner, you could end up with someone falling and injuring themselves on your property and inheriting legal trouble. On the cleaning of common areas, it is common to see one of the on-site tenants handle the job. Usually the cleaning of the common areas, or handling of grass cutting or snow removal can be done with a reduction in the rent, just make sure it is stated in writing.

How much should I budget for maintenance on my property?

You should budget an ongoing expense for maintenance items regardless of if you do them yourself or contract them out. A good rule of thumb is to budget 5% of gross rent, or up to one month’s gross rent per year, towards repairs and maintenance. This amount will also include large repairs such as roof, furnace, etc. which will be amortized over their expected life to smooth out your repairs and maintenance budgeting year to year. You don’t want to overspend on these maintenance items so you should err on the cheaper side when allocating expense dollars to these items.

Make sure you budget for these maintenance items in your income property and ensure the work is done in a timely manner. You'll be thankful you did!

Readers, do you do your own maintenance on your income properties or do you outsource them?

Investing In Real Estate – Building The Right Team #7: Bookkeeper

No one will ever care as much about your investment property as you do. But what exactly should you care about most as an investor? The short answer is: how much money you’re making! The funny thing is a lot of investors don’t actually know how well their investment property is performing. Don’t be one of those people! Today we are going to talk about the next member of your team, which will help you with this problem…your bookkeeper.

Do I really need a bookkeeper?

Technically, you don’t need one. You can do the bookkeeping yourself if you work with a simple spreadsheet or an accounting software such as quickbooks or simply accounting. Just make sure you keep detailed records and ensure you input all the income, expenses, etc, properly and allocate it to the right property. When you start out, it's often a good idea to start doing your own books so you can learn. As your portfolio grows, you will want to consider delegating the task to a bookkeeper.

What will my bookkeeper do for me?

A bookkeeper will input all income and expenses into whatever accounting software you use. They will keep neat records so when tax time rolls around, you have everything handy. They will also run regular reports (ie. monthly, quarterly) so you can track the performance of your investments.

What else should I know about bookkeeping?

The biggest aspect of bookkeeping is measuring performance. If things are going well and as good or better than expected then you want to keep up the good work to make sure things don’t slip. If things aren’t performing so well, it allows you to look at where the numbers are going wrong and make some changes (ie. increase rents, renovate, implement energy efficiency updates). And if after doing all you can, and after continuing to monitor the performance, it doesn’t turn around, maybe it wasn’t a good investment and its time to sell and move on.

How much will my bookkeeper cost?

As in the rest of the your team members the cost will vary, but bookkeeping is a highly automated process so the rates in your area should be pretty standardized. Either a per hour amount or a monthly fee is most common. Also make sure to check the work to make sure they are doing a good job with minimal errors and making it worthwhile for you.

The bottomline is that understanding your investment properties performance is very important and not a task to be taken lightly. Consider hiring a bookkeeper to make sure this is taken care of properly.

Do you do your own bookkeeping or outsource it for a bookkeeper?

Investing in Real Estate – Building The Right Team #4: Accountant

As the saying goes, “The only two certainties in life are death and taxes.” Continuing on in your journey of investing in real estate and building your team, you’ll need a good accountant to figure out the latter. Today we are going to talk about why you need a good accountant on your team and how they can help you succeed.

Why Do I Need An Accountant?

The main function of your accountant in relation to your real estate investing is to help figure out the taxable rental income attributable to your rental properties. They will help with filing your tax return, and provide advice relative to your situation and any tax planning that is necessary. All this would also apply to your employment income (if your employed) as this would all go on the same tax return.

How Will My Accountant Help?

Outside of the filing of tax returns, your accountant will help with general tax advice and planning.  Decisions an accountant can help with include:

• Can you expense or amortize a certain repair or renovation?
• How much depreciation expense should you take?
• When is a good time to sell based on tax consequences?

An accountant will also help should you ever get audited by CRA. Basically they will help you within existing tax laws to maximize your after tax rental income, which is really what investing is all about.

What Should I Look For In An Accountant?

As a real estate investor, it is a definite plus to deal with an accountant that has lots of experience with real estate investors. Ask for references from other investor colleagues. Having an accountant with a Chartered Accountant designation is also huge plus.

How Much Will My Accountant Cost?

This will vary depending on your tax situation and the accountant you use. Some charge a flat rate for a comprehensive tax return and some charge per hour. One way to lower your bill will be to have all your paperwork organized for tax time so your accountant isn’t drowning in paperwork. This can be done with bookkeeping software such as Simply Accounting or by hiring a bookkeeper to keep proper records of everything.

In the business of real estate investing, it’s not what you make, it’s what you keep. You also need to be aware of exactly how much your investment properties are making so you can make any necessary changes to ensure your success. Keep diligent records with the help of your accountant and your cheque book will be happy you did!

Tax Time – Income & Expense Categories

As we approach the end of tax season, hopefully you haven’t procrastinated.  For you tax filers (early or late) with income property, today we are going to discuss income & expense categories to include when filing your return for an income property.

As a person with income properties, for each property, you will file a form called a “Statement of Real Estate Rentals”. On this form you are basically showing what your net taxable rental income is for that property, for the year.  To come up with this net income amount, you must provide your rental income for the year and subtract all related expenses. But what items should be included in these calculations?

Income

1. Rent – all rents for your property.
2. Parking Income – any parking fees charged.
3. Laundry Income – any laundry fees charged.
4. Other Income – ie. solar panel income or other miscellaneous income.

Total these income items up and you come up with your Gross Rental Income.

Expenses

1. Advertising – any expenses related to advertising the property for rent.
2. Insurance – any expenses related to insuring the property.
3. Interest – any expense incurred by borrowing to acquire the rental income.  Most notably the mortgage interest.
4. Office Expenses – ie. office supplies.
5. Legal, Accounting & Professional Fees – any expenses related to hiring a professional in running the property, ie. bookkeeping.
6. Management/Admin fees – ie. expenses related to hiring a property manager.
7. Maintenance & Repairs – ie. fixing broken window, snow removal.
8. Salaries, Wages & Benefits – any employees you pay to run your properties.
9. Property Taxes – city property tax paid.
10. Travel – any travel costs to acquire/sell/manage a property
11. Utilities – any utility costs paid by the landlord.
12. Motor Vehicle Expenses – you are allowed to deduct vehicle expenses directly related to driving for purposes of managing the property. This is a grey area and detailed records should be kept for proof.
13. Other Expenses – any other expenses not mentioned above.

Total these expenses to come up with your Deductible Expense Total.

Taking your gross rental income minus your deductible expense total will give you a net income (loss) before adjustments. At this point you are able to deduct your CCA allowance (depreciation) to come up with your net income. This net income amount will be added to your other income sources for the year for tax purposes.

What has been your experience with the Statement of Real Estate Rentals Form?