The real returns of real estate
All across Canada, and more importantly in a great city like Toronto, there is never a shortage of news, and opinions, about everything that has to do with real estate.
From first-hand experience, I’ve learned quite a bit about real estate having been on both sides of the buying and selling process. You may think me quite young, but I bought my first home at the age of 23, stuck to my financial plan and was mortgage-free by the age of 32. I have since dug deep into the world of rentals and property management. There’s a lot to learn, but more importantly, a lot to gain.
As we fight our way through the annual buzz of RSP season, prior to the pressures of tax season, we often overlook one of our largest purchases, and the biggest source of equity, in our lifetimes.
It’s important to note that your primary residence is not an asset. It is, however, a great tool to force you to save – paying down the mortgage is a form of saving. And, if managed properly, other doors, as it relates to resources, will open for you as your equity grows.
As life progresses and you pay down your debt, you will appreciate the significant equity that has built up in your home. If done efficiently, you can create an enjoyable retirement, as well as a well-thought-out estate for your children.
Everyone has different goals. Depending upon the number of children that you have, your income, your expenses, your assets and the like, as well as the ups and downs of life, it’s best to talk to a professional who will prioritize your interests.
This can be a great source of tax-free income – yes tax-free – and it will help to keep you in a lower tax bracket. By refinancing the equity in your home, it will allow you to control the amount of money that you want to use each year. If you’re considering doing this, don’t forget that your lender will base the amount of money that they will let you access on your current incomes. As a result, this is a great planning tool if you have not yet retired and are approaching that milestone.
There are more costs related to this option than one might think, and it can quickly erode the capital, and the value, of your home. Reverse mortgages are, however, suitable for certain circumstances. Reach out to someone who can explain the ramifications, if you are considering pursuing this path.
Selling, renting or downsizing
At different stages of life, we want different things. We’re always thinking about the ‘what ifs’ and the ‘it depends’ scenarios. For example, I live in a beautiful detached home with my lovely wife, and with three kids under under the age of three – yes, I’m busy. I won’t be selling or renting any time soon. However, if was just me (I’m now 40), I’d list my house tomorrow. If you’re curious as to why, drop me an email.
Every scenario is unique, and no one option is the best. Review your goals and make sure that you have all of the information that will help you to shape the retirement that you deserve.
Brandon Parkes is a Senior Consultant with IG Wealth Management. He was also mortgage-free at the age of 32. 416.450.8538 or firstname.lastname@example.org