One of the most exciting days has finally arrived as you grip the cool, comforting metal in your hand. It’s the key – not just to your new home, but to the next chapter of your life. As you open the door, you’re overcome with pride and joy. You start walking through your new home, taking it all in, reflecting on the steps you took to get here. So just how did you get here?
The road to owning real estate can be onerous (pun intended), complex and – much like the stock market – unpredictable. In the last issue of Toque we touched on the advantages for first time home buyers of saving for a down payment. Setting up a regular pre-authorized contribution is an easy way to pull funds directly from your bank account to a savings vehicle. Tools like the Tax-Free Savings Account (TFSA), Home Buyers’ Plan (HBP), and First Home Savings Account (FHSA) are strong incentives to help.
But maybe you’re ready for the next stage – a recreational property. Studies show that Gen Xers (ages 43-58) are driving demand for recreational homes, fueled by career stability, wealth transfer, and inheritances. If owning a recreational property and building those family memories is your dream, it’s important to sit down with an investment advisor to discuss how this dream fits into your financial plan. Just like owning a home, owning a cottage has many costs associated with it, and capital gains tax implications if you need to sell. Knowing if your current liquid assets can help cover future expenses such as maintenance bills or property taxes can put your mind at ease.
In some cases, the inheritance is a family property such as a cottage. Often this transfer can result in a burden for the next generation. If keeping the cottage in the family is important to you, your advisor can work with you to set up a cottage succession plan while keeping tax planning strategies and long-term ownership implications at the forefront.
What if you’re feeling comfortable including income properties in your investment and retirement savings picture? This can be a great long-term game plan – but it can be complicated, too. Cash flows, income projections, and tax implications are things to consider. Your advisor can help you take an objective look at your becoming a landlord and provide guidance about whether this is a hat you want to wear, or if other investment solutions should be discussed.
Investing in property can be a significant and extremely valuable part of your investment portfolio, and you want to ensure that it fits just right with your financial plan. After all, a good foundation is always key.
- Monica Mazun
Associate Investment Advisor