After the mortgage.

[ricosuave]

Originally Posted by CaptainCrunch

Quit your job and go work in a bowling alley

"Wormius, did you polish your head in the Shine-O Ball-O?"

[Wormius]

Originally Posted by blankall

Renting out a property is always a great way to build equity. Be aware that it can be a pain in the ass dealing with tenants though. You're also leaving yourself to the whims of the real estate market. In this case you've already one egg in that basket (your house) and would be adding a second.

Have you maxed out your TFSA and RRSP deductions yet? Those are also great options if plan on earning income for the foreseeable future.

My thought about the rental property is that it would hopefully pay for itself with minimal effort on my part. Buying a condo to rent out was quickly kyboshed by my wife, who actually crunched the numbers and decided it wasn't worth it.

We're not maxing out our RRSPs, but we`re making a fair contributions bi-weekly. We are maxing out the kids RESPs though. We have started TFSAs and put money in, but not a significant amount and its really not making a lot of interest either.

[ricosuave]

Originally Posted by fotze

The day I handed them the final check, I thought I would get a nice certificate or something. The guy at the bank just said 'thats it', nothing in the mail, just thats it.

Me too! LOL My mortgage agent mailed me a couple of unfilled balloons and a handful of confetti in with the title.


PS, congratulations Wormius!

[Wormius]

Originally Posted by Makarov

37? That's amazing. Fata me, I'm 34 and still haven't even bought my first house yet.

I have an Asian wife who absolutely abhores debt of any kind.

By the way, we bought our house over 6 years ago. It was a lot cheaper back then.

[Canehdianman]

Originally Posted by Wormius

I thought you did that before the mortgage was done?

You can certainly do it once you have enough equity in your house to borrow against it, but starting once the mortgage is gone works as well.

It essentially replaces your mortgage with a loan that you use for investment purposes, meaning that the interest is now tax-deductible and (ideally) you are earning a decent return.

it's not a risk-less strategy, but I intend to give it a go.

[blankall]

Originally Posted by Wormius

I have an Asian wife who absolutely abhores debt of any kind.

Dude...I picked the wrong kind of woman. My woman absolutely abhores not buying 3 pairs of black boots a month.

[Makarov]

Originally Posted by Wormius

I have an Asian wife who absolutely abhores debt of any kind.

By the way, we bought our house over 6 years ago. It was a lot cheaper back then.

Oh, no need to be apologetic about it. I think its awesome. I would love to do the same thing. When we do buy, my goal is to have it paid off in ten years.

[Canehdianman]

Originally Posted by fotze

The interest is only deductible against the money you make from the investment?

I believe so. I intend to invest the funds in dividend yielding stocks and pocket the difference (to re-invest in other accounts).

[V]

I heard an old wive's tale that it's a lot easier for someone to steal your house via identity theft if the bank isn't first on your house's title. I was always told that you should at least have some kind of loan against your house.

I have no idea if this is true in the slightest.

[chemgear]

Hmmm something I forgot to mention is options 2, 3, and 4 results in additional investment in real estate. Depending upon the spectrum/size of your other investments - something to maybe think about is whether you want to double down on it.

Some people are cool with some concentration in it, others like to be a little more diverse in their holdings.

[memphusk]

Originally Posted by blankall

Dude...I picked the wrong kind of woman. My woman absolutely abhores not buying 3 pairs of black boots a month.

Maybe you start wearing the boots, and she will stop buying them.

[Wormius]

Originally Posted by blankall

Dude...I picked the wrong kind of woman. My woman absolutely abhores not buying 3 pairs of black boots a month.

I should correct that - she abhores paying interest.

You have probably had a lot of fun though. My married life has consisted of a lot of non-fun purchases only. I don't plan on anything crazy though, I would like to buy a kayak and have some fun in the lakes around Alberta this year.

[Wormius]

Is it right to start buying property in this market? I think any future purchases will not be paid off in the same zealousness of our house. If it was a rental property, and could sustain itself, that would be ideal. Has anybody had success or failure with that? Is there any profit before the property is paid for? Are there better areas in the city for that kind of thing? I guess close to c-trains is usually a good one, but anything else?

[blankall]

Originally Posted by Wormius

I should correct that - she abhores paying interest.

You have probably had a lot of fun though. My married life has consisted of a lot of non-fun purchases only. I don't plan on anything crazy though, I would like to buy a kayak and have some fun in the lakes around Alberta this year.

If you call having to wade through a pile of black leather boots in order to find your 3 year old sneakers fun..then yes. Lots of fun.

It's alright though. I got even by buying an extremely large TV. I'm pretty sure she cried for a week when she realized some crappy lamp would no longer be the focal point of our living room. FML.

[Locke]

Originally Posted by Wormius

Is it right to start buying property in this market? I think any future purchases will not be paid off in the same zealousness of our house. If it was a rental property, and could sustain itself, that would be ideal. Has anybody had success or failure with that? Is there any profit before the property is paid for? Are there better areas in the city for that kind of thing? I guess close to c-trains is usually a good one, but anything else?

Theres a lot there. Typically rental properties dont make profits for several years.

The rent will probably cover the mortgage, and for the first few years the tax losses will help generate a tax refund, but after that you start having to pay the mortgage, property taxes, maintenance and insurance, the interest will not longer cover the income and then you'll have to also pay taxes on the income.

[bizaro86]

Originally Posted by Wormius

Is it right to start buying property in this market? I think any future purchases will not be paid off in the same zealousness of our house. If it was a rental property, and could sustain itself, that would be ideal. Has anybody had success or failure with that? Is there any profit before the property is paid for? Are there better areas in the city for that kind of thing? I guess close to c-trains is usually a good one, but anything else?

Rental properties can be done, but it's definitely work. I've bought some that pay for themselves+ lately, but if it's not something you're willing to put time into yourself you either need to 1) find a partner to manage everything for you or 2) not do it.

You could definitely borrow a bunch of money and put it in dividend paying stocks. That way you'd deduct the interest on the loan. Also, if you got a loan smaller than the loan you had before, you could set the amortization shorter and keep the payments the same. Might be a good way to end up with a sizable stock portfolio. This could also be used to invest in real estate on a more diversifed basis through REITs.

[Red]

Enjoy not having that payment. You will be surprised how quickly the "mortgage free good feel" wears off. Best to not do anything that you might regret in a year.

BTW, you do get a nice Land Titles document few months after. But no fanfare.

Investment properties are a good idea, but with the prices nowadays and the uncertainty you may want to hang on and save your money.

[bizaro86]

Originally Posted by Locke

Theres a lot there. Typically rental properties dont make profits for several years.

The rent will probably cover the mortgage, and for the first few years the tax losses will help generate a tax refund, but after that you start having to pay the mortgage, property taxes, maintenance and insurance, the interest will not longer cover the income and then you'll have to also pay taxes on the income.

You can always claim CCA. Granted, you'll have to pay tax on the recaptured amount when you sell, but I prefer to pay my tax sometime in the far future than right now.

[Flash Walken]

Would an acceptable income shelter be to incorporate before buying a rental property, and paying yourself to manage said property, ensuring roughly $0 in profits, and thus, less taxation?

[GP_Matt]

I would caution against doing nothing for a while. If you suddenly have an extra mortgage payments worth of funds in your account every month you may find yourself getting used to it and that will make it harder to commit later.

As for rental properties, I kept my last house when we moved and have been renting it out for a few years now. I pay a property manager 10% to take care of everything and finished last year with a cash loss of $3500 and a paper gain of $8500. ie I spent more than I took in, but most of that money went to reducing the principle on the mortgage. I should be cash positive at some point, but the mortgage is being paid down so I look at it as a savings account.
One thing to consider that has been mentioned a bit above is that if you don't have significant assets outside your residence and your future rental property then you will have an investment portfolio that isn't diversified at all. It might be more prudent to borrow against your house to invest in dividend paying funds for the tax break or just direct the value of your mortgage payment to an investment account every month if you dislike paying interest.