Why Start With Real Estate?

Isn’t real estate is too hard, too expensive and too risky?

If you’re serious about taking control of your financial future (you wouldn’t be here if you weren’t), then you’ve probably done some serious thinking and research related to real estate investing.

Like anything you research, you’re going to find those that believe real estate is the #1 asset class as well as those that believe that it is too hard, too expensive and too risky.

Even those who are confident that investing in real estate is a great way to generate passive income and build generational wealth may have some unanswered questions such as:

• How do I know which property to buy?
• How do I know if it will rise in value?
• How do I know how to select a good tenant that will pay rent on time and won’t trash the property?
• Where will I come up with enough money?
• What if I need money for an emergency and it is “stuck” in my rental property?
• How do I know if I have enough expertise to buy a real estate investment property?
• How much time will I have to commit to my rental property?
• …and many more.

These questions are very important questions to consider to ensure you are truly making an investment and not simply speculating.

Although there is learning to be done to prepare yourself for your real estate investing journey, real estate is definitely the asset class the Canadian Wealth Secretss believe to be one of the safest, accessible and secure investment options for those who are in a career with a predictable annual income. Not only are we huge fans and investors in real estate property, but we also think it is one of the best places to begin your wealth building journey.

Why Real Estate Instead of Stocks, Bonds or Mutual Funds

Imagine investing in something you couldn’t see or touch?

That is what it is like investing in stocks, bonds, mutual funds and other paper assets.

When we began our wealth building journeys, we weren’t comfortable taking our hard earned money to purchase paper assets that may go up, may go down or may go out of business completely.

Instead, we turned to investing in real estate rental properties not only because real estate typically appreciates in value over time, but your tenant would be paying down the mortgage and providing cashflow in your pocket. 

The investment trifecta!

While most are trained from the stock market and paper asset world to think of appreciation as the main motivator for buying an asset, this is not the case in real estate investing. When buying a rental property, your goal is to collect monthly rent from a tenant as a means to cover all expenses including borrowing costs with enough left over to put some money in your pocket. In the real estate investing world, asset appreciation is simply the cherry on top.

Leveraging 3 Ways to Grow Your Wealth

Not only are there 3 ways that investing in rental properties can grow your wealth, but you also have the option of leverage to stretch the return on your investment dollar.

As mentioned, with each monthly rent payment that you collect, your net worth increases in 3 ways:

• Monthly cashflow (profit after paying mortgage & expenses);
• Principal paydown (the balance of your mortgage goes down with each mortgage payment); and,
• Appreciation (real estate typically increases in value over the long run).

While increasing your net wealth in 3 ways is fantastic especially when comparing to most other investments, these aren’t the only wealth buildig benefits.

Since real estate is such a stable asset class, banks are willing to lend you a portion of the cost of the property (usually 70-80%) if you are a qualified borrower.

While this might not seem like a big deal on the surface, this has a massive impact on your rate of return (ROI).

Here is an example using friendly numbers to drive home this point.

• Rental property purchase price: $100,000
• Down payment & closing costs (your investment): $25,000
• Mortgage amount: $80,000
• Monthly payment at 25 year amortization, 5.69%: $497.20 
• Estimated monthly expenses (property taxes, insurance, utilities): $285
• Estimated monthly rent: $900
• Monthly cashflow: $117.80

Looking at these numbers on a monthly basis may not be super exciting, however when you consider what happens after year 1, things become more clear:

• Cashflow generated: $1,413.60
• Mortgage principal paid down: $1,505.86
• Property value increase (assuming 3% annual appreciation): $3,000

After 1 year with this property, you’re looking at $5,919.46 in your pocket with only $25,000 invested out of your pocket.

That is a 23.7% return on your investment. 

THAT is the power of investing in real estate rental properties.

Not to mention that it is always reassuring to know that you own a hard asset that you can go see and touch unlike other paper assets like stocks, bonds or mutual funds. 

This is why the Canadian Wealth Secrets Team believe real estate is the best asset class to start your wealth building journey.

Design Your Wealth Management Plan

Crafting a robust corporate wealth management plan for your Canadian incorporated business is not just about today—it's about securing your financial future during the years that you are still excited to be working in the business as well as after you are ready to step away. The earlier you invest the time and energy into designing a corporate wealth management plan that begins by focusing on income tax planning to minimize income taxes and maximize the capital available for investment, the more time you have for your net worth to grow and compound over the years to create generational wealth and a legacy that lasts.

Don't wait until tomorrow—lay the foundation for a successful corporate wealth management plan with a focus on tax planning and including a robust estate plan today.