Investment

Will your investment property actually make money? – Financial Post

Published

3 years ago

January 4, 2022

Harry Miller

The monthly cash flow from your rental property is important, but it’s not everything

MoneyWise

Clayton Jarvis

Andy Dean Photography / Shutterstock

Becoming a real estate investor in Canada may seem like a surefire shortcut to wealth.

Though it has been for many, few people become successful real estate investors simply by buying whatever properties they can afford and assuming the rent will do all the heavy lifting.

A recent analysis found that, from January 2020 to May 2021, nearly all Toronto homes purchased would lose money for their owners in the rental market. Research has shown that Montreal property investors often lose money on a monthly basis .

Choosing the right property to invest in requires careful consideration. You need to examine the surrounding neighbourhood to understand the appeal it offers residents, take a look at the local economy to ensure it’s supportive of long-term housing demand and evaluate the property itself in terms of rentability.

And one of the most important steps is calculating cash flow, the amount of money the property will either earn or lose every month.

If it’s your first time encountering the term “cash flow,” don’t sweat it. Calculating it is fairly easy.

Monthly income isn’t everything

Though ideal, positive cash flow isn’t necessary for a property investment to ultimately be considered successful. A negative cash-flowing home can still be a winner in the long run — if it appreciates in value over time, as has generally been the case with real estate in Canada, and if you can afford the monthly cost.

“Most people, and especially beginner investors, believe that successful investing is all about cash flow, and that there’s really nothing else that matters. But the real winnings in real estate come from having a long-term view,” says Tom Karadza of Rock Star Real Estate in Oakville, Ont.

Either way, determining what a property will earn (or cost) you every month is critical in helping you understand whether an investment property fits your budget or your overall investing plan.

The cash-flow formula

The first thing to do is determine the property’s gross income. Based on the home’s condition and local rent values, how much will you realistically be bringing in from rental income every month?

Once you’ve got that number, it’s time to add up your monthly expenses and subtract them from the gross income. Taxes, maintenance fees and property management costs all need to be included here, as do utilities if your tenants won’t be paying them.

This part of the equation can be tricky for inexperienced investors, who may not know what to pencil in for maintenance and management.

Monika Jazyk, an Ontario-based real estate investor and founder of Real Property Investments, says she typically subtracts five per cent of the monthly rental amount for maintenance, and eight per cent for property management. If you’re not using a professional property management company, you can ignore this expense.

Jazyk says investors also need to factor in the cost of vacancies. She suggests basing this figure on your local market’s vacancy rate and subtracting that amount from your gross income. So if your local market has a five per cent vacancy rate, you would subtract five per cent from gross income.

“There are times when it could be zero because there’s such a demand for housing, but you will have times during your hold period when tenants leave, so you should always just put that number in there anyways,” she says. “I always do three per cent.”

Finally, subtract your monthly mortgage payments from your gross income. What’s left over will give you a clear idea of what your monthly cash flow will be.

An example

Let’s run the numbers on a single-family home in Toronto that’s been assessed at $1 million. The tenants are paying all utilities and you’ll be managing the property yourself, so no need to factor in those costs.

Monthly rental income: $4,000
Monthly expenses: $509 (taxes), $200 (maintenance), $120 (vacancy)
Mortgage cost: $3,501 ($800,000 principal, 25-year amortization, five-year fixed rate of 2.29 per cent)

This particular property would be cash-flow negative by $330. For Toronto, circa now, that’s not bad.

If it’s not good enough, improving a property’s cash flow is possible. Working with your mortgage broker to get a lower interest rate will make a difference, as will adding a second rental unit, renting out space in the garage or even putting billboards up on your property, if those are options.

But you won’t be able to find solutions to your cash flow problems until you know how to correctly identify them. Make sure you know how much you’re making or losing every month.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

14 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Investment

Canada’s Probate Laws: What You Need to Know about Estate Planning in 2024

Published

15 hours ago

September 19, 2024

Harry Miller

Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.

For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.

Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.

Let’s unearth how these updates can simplify the process for you and your family.

What is probate?

Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.

Here’s how it works.

Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.

Probate ensures everything is done by the book, giving you peace of mind during a difficult time.

Recent Changes in Canadian Probate Laws

Several updates to probate law in the country are making the process smoother for you and your family.

Here’s a closer look at the fundamental changes that are making a real difference.

1) Virtual witnessing of wills

Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.

Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.

2) Simplified process for small estates

Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.

Fewer forms and legal steps mean less hassle for families handling modest estates.

3) Substantial compliance for wills

Courts can now approve wills with minor errors if they reflect the person’s true intentions.

This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.

These changes help make probate less stressful and more efficient for you and other families across Canada.

The Probate Process and You: The Role of a Probate Lawyer

(Image: Freepik.com)

Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.

Here’s how they can help.

Navigating the legal process

Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.

Handling paperwork and deadlines

They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.

Resolving disputes

If conflicts arise, probate lawyers resolve them, avoiding legal battles.

Providing you peace of mind

With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.

With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.

Why These Changes Matter

The updates to probate law make a big difference for Canadian families. Here’s why.

Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.

With these changes, probate becomes smoother and more manageable for you and your family.

How to Prepare for the Probate Process

Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.

Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.

These simple steps make the probate process easier for everyone involved.

Wrapping Up: Making Probate Easier in Vancouver

Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.

Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.

Economy

Energy stocks help lift S&P/TSX composite, U.S. stock markets also up

Published

3 days ago

September 17, 2024

Anne Joseph

TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.

The S&P/TSX composite index was up 34.91 points at 23,736.98.

In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.

The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.

The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.

The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.

This report by The Canadian Press was first published Sept. 17, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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