Calgary downtown condos

[gladaki]

My Mutual funds gave me 8% return in a year. So investing in real estate doesn't look like lucrative option to me.

[bizaro86]

Originally Posted by Cowboy89

Don't forget that the dividend returns you get from a REIT like boardwalk REIT is treated more favorably taxwise than income from a rental property. 3.0% before tax return from a REIT > 3% return from an investment property.

Disagree. Rental income can be shielded by depreciating the building component. It reduces your cost basis, so you pay the tax when you sell. In exactly the same way, the return of capital portion of a REIT distribution shields current income, but reduces your cost basis, so you pay the tax when you sell.

I've done both and they're extremely comparable.

[Calgary14]

Originally Posted by bizaro86

Disagree. Rental income can be shielded by depreciating the building component. It reduces your cost basis, so you pay the tax when you sell. In exactly the same way, the return of capital portion of a REIT distribution shields current income, but reduces your cost basis, so you pay the tax when you sell.

I've done both and they're extremely comparable.

Most REITs pay dividend income. Dividend income (Canadian) gets a dividend tax credit while rental income is added to taxable income. Rental can be shielded but then this creates a recapture upon selling in most cases so it's more of a timing issue. Not in all cases though. Taxes added back upon a sale depends on the sale price and tax cost. In most cases it doesn't make sense to take CCA

[bizaro86]

Originally Posted by Calgary14

Most REITs pay dividend income. Dividend income (Canadian) gets a dividend tax credit while rental income is added to taxable income. Rental can be shielded but then this creates a recapture upon selling in most cases so it's more of a timing issue. Not in all cases though. Taxes added back upon a sale depends on the sale price and tax cost. In most cases it doesn't make sense to take CCA

Distributions from REITs aren't typically dividends eligible for the dividend tax credit. Boardwalk REIT came up in the thread. Their tax info is here: http://www.boardwalkreit.com/IncomeTax/BREIT2012T3.pdf

Their distributions are a combination of non taxable return of capital (tax deferral) and fully taxable "other investment income"

[bizaro86]

Originally Posted by Calgary14

Most REITs pay dividend income. Dividend income (Canadian) gets a dividend tax credit while rental income is added to taxable income. Rental can be shielded but then this creates a recapture upon selling in most cases so it's more of a timing issue. Not in all cases though. Taxes added back upon a sale depends on the sale price and tax cost. In most cases it doesn't make sense to take CCA

I'm curious why you say not to take CCA, especially since your (very good) blog indicates you're an accountant. My understanding is that all the CCA I take will get recaptured in the year I sell the property. Assuming tax rates don't go up too much, I'd rather have the money now than later. The only reason I could see not to take it would be if you expect to go up a tax bracket or two when you sell. But I'd be very interested in hearing about it if I'm missing something.

[Wormius]

We were toying with buying a property after we had paid down our mortgage, but the profit margin seems pretty tight. We ran some numbers early on, and figured it wasn't really worth it for a condo, but maybe you guys picked out some decent properties. This is one I just noticed because it was in Realtor 1s foreclosure listings, and it is located in a semi-convenient location for us. So, just looking at, for example this foreclosure:

MLS Listing: C3592774
$209k, so 5% down is about $10k.

Assuming a 3.5% mortgage rate, you've got the following expenses:

Mortgage $996 / month
Condo Fees: $279 / month
Property Tax: $110 / month (guestimated)

So the break even every month is $1383, at least. Since there are no 1 bedroom condos around there going for even that much, I am guessting that this kind of condo would be a bust as an investment prospect, but what are you guys who are renting out condos choosing that makes financial sense? I think somebody earlier on said they were getting about $5k / year out of theirs. Maybe if there is virtually no work involved that would be okay, or do people own a group of 3 or 4 with close vicinity to make it more lucrative.

[Travis Munroe]

I have more confidence in 2 bedroom condos as the extra rent more than offsets the slightly higher purchase price when the right property is found.

I went to show a Evergreen bungalow condo last week to a investor client and it sold as we were looking at it.
Numbers were quite similar to what you posted however condo fees were 180 and taxes lower. Rent would be in the 1450-1500 range.
Looking at a 1 bedroom might save the buyer 20k now but he is looking at 200-300 less a month in rent.

A grandfathered, 4 suite - 2 story in Bridgeland came up yesterday for high 500's. Had it not been for asbestos issues and the 30+k bill to bring the house to worry free I would have posted it in this thread!

[ranchlandsselling]

Originally Posted by Wormius

We were toying with buying a property after we had paid down our mortgage, but the profit margin seems pretty tight. We ran some numbers early on, and figured it wasn't really worth it for a condo, but maybe you guys picked out some decent properties. This is one I just noticed because it was in Realtor 1s foreclosure listings, and it is located in a semi-convenient location for us. So, just looking at, for example this foreclosure:

MLS Listing: C3592774
$209k, so 5% down is about $10k.

Assuming a 3.5% mortgage rate, you've got the following expenses:

Mortgage $996 / month
Condo Fees: $279 / month
Property Tax: $110 / month (guestimated)

So the break even every month is $1383, at least. Since there are no 1 bedroom condos around there going for even that much, I am guessting that this kind of condo would be a bust as an investment prospect, but what are you guys who are renting out condos choosing that makes financial sense? I think somebody earlier on said they were getting about $5k / year out of theirs. Maybe if there is virtually no work involved that would be okay, or do people own a group of 3 or 4 with close vicinity to make it more lucrative.

Why does this 5% keep coming up?

[darklord700]

Originally Posted by bizaro86

I'm curious why you say not to take CCA, especially since your (very good) blog indicates you're an accountant. My understanding is that all the CCA I take will get recaptured in the year I sell the property.

One caveat is you cannot use CCA to creat rental loss. So generally, you'll claim all running costs first including interest, property tax and condo fees. If you have net rental income, then I do not see any reason not to claim CCA to reduce your rental income.

[darklord700]

If you watch Scott McGillivary's Income Property show, you'll see his revenue properties are never condos. You generally will get more money renting out a duplex/triplex or in a live up and rent below scenario. Most people buy rental condo only hope to ripe the benefit of a jump in the condo market. But at this stage, it's probably a little late in the condo game.

[Travis Munroe]

Originally Posted by darklord700

If you watch Scott McGillivary's Income Property show, you'll see his revenue properties are never condos. You generally will get more money renting out a duplex/triplex or in a live up and rent below scenario. Most people buy rental condo only hope to ripe the benefit of a jump in the condo market. But at this stage, it's probably a little late in the condo game.

And if you realized how "not accurate" those shows are you would realize how many investors truly do believe in condos. They do what is good for TV. I am not taking anything away from the SFH market....a different type of investment all together.


Not as much money for renovators/contractors in the condo game.
Also, not everyone has the cash to buy 400k + when they can get a investment with a similar return on a $230k place.

[bizaro86]

Originally Posted by darklord700

One caveat is you cannot use CCA to creat rental loss. So generally, you'll claim all running costs first including interest, property tax and condo fees. If you have net rental income, then I do not see any reason not to claim CCA to reduce your rental income.

That's exactly what I do. If there's a good reason not to, I obviously want to know.

[Rutuu]

Originally Posted by Cowboy89

Don't forget that the dividend returns you get from a REIT like boardwalk REIT is treated more favorably taxwise than income from a rental property. 3.0% before tax return from a REIT > 3% return from an investment property.

Shhhhh...

How dare you suggest a liquid way of earning a 3% return! Where are you going to live Cowboy89?! You gotta live somewhere.

Real Estate goes up forever.

[Calgary14]

Originally Posted by bizaro86

Distributions from REITs aren't typically dividends eligible for the dividend tax credit. Boardwalk REIT came up in the thread. Their tax info is here: http://www.boardwalkreit.com/IncomeTax/BREIT2012T3.pdf

Their distributions are a combination of non taxable return of capital (tax deferral) and fully taxable "other investment income"

Hi, thanks for the compliments on the blog. The ROC portion (return of capital) is deferred as you mentioned above and as someone else mentioned CCA can't be used to create or increase a loss.

As far as taking CCA goes in 90% of cases I have seen it doesn't make sense to take it.

The recapture of CCA occurs when the property is sold, and the cost of the property for tax purposes (called the undepreciated capital cost – UCC) is less than the sale price of the home. The difference between the original cost and the UCC balance is then taken into income for that year. If the sale price is greater than the original cost, this would result in a capital gain.

The reason CCA doesn't make sense 90% of the time is because of marginal rates, the timing of income and the deductions in the current year.

Hope that helps. If not send me a private message and I can explain further

[Calgary14]

Originally Posted by Realtor 1

And if you realized how "not accurate" those shows are you would realize how many investors truly do believe in condos. They do what is good for TV. I am not taking anything away from the SFH market....a different type of investment all together.


Not as much money for renovators/contractors in the condo game.
Also, not everyone has the cash to buy 400k + when they can get a investment with a similar return on a $230k place.

I agree with the above - it's a different investment all together. If you are hands off and don't want to be bothered with the little things that come up with being a landlord, then condos are the way to go. The drawbacks are: condo fees and special assessments. And those can be (potentially) huge drawbacks.

And as mentioned above condos aren't shown on TV partly because there is less customization to be done but also because there is no money in the game for renovators, contractors etc. There is still a little bit of money to be made since someone is essentially paying your mortgage for you

In my opinion when everything is considered a single family home wins hands down as an investment but it all depends on personal preference, and as mentioned above not everyone has the cash available for a $500k investment into a detached home