Real estate presents two basic advantages over other forms of
investment: firstly, land is indestructible and buildings
semi-permanent; and secondly, the amount of land available in most
populated areas is limited. It is traditionally less volatile than
many other investments and if purchased carefully can be as secure
as a government bond with a greater return.
A well-balanced portfolio should contain not only stocks and bonds but
also real estate to ensure stability of income, growth and safety in
any economic situation. Real estate can also be an excellent
investment for retirement or estate planning.
FAVOURABLE TAX ASPECTS
A profit from the disposition or sale of real estate is treated as a capital gain and
The benefit of Capital Cost Allowance (depreciation) as a fully tax deductible cost.
The depreciation expense allows one to defer income taxes.
Interest on funds borrowed for the purchase of investment in income-producing real
estate is tax deductible.
One of the key benefits of real estate is leverage or, in other words,
debt. The investor borrowers to purchase a property and controls and
owns the investment without putting up all the cash required. Debt
also creates a hedge against inflation because one gets to make future
mortgage payments with cheaper dollars.
RETURN ON INVESTMENT
Real Estate returns are obtained in a number of ways including the following:
Annual Cash Distribution - These are cash flows available after all annual expenses
including mortgage interest and principal repayment, but before deduction of depreciation.
Generally, for the first several (one to three) years, the amount of depreciation
allowable to be claimed exceeds the amount of income that is taxable thus the project's
cash flow can be distributed through to the investor with significant tax advantages.
Capital Appreciation - This is simply the amount the project has increased in value.
This return is the primary focus of the purchase of real estate, i.e. selling it for a
The objective of a trouble-free investment is to minimize the time
spent by the investor in monitoring the investment. One of the
benefits of promoter-sponsored real estate investments is that the
investor purchases not only the promoter's recommended property but
also the promoter's advice, expertise, professional management and
BUY LAND, THEY'RE NOT MAKING ANY MORE OF IT!
"Ninety percent of the world's millionaires have acquired their wealth
through real estate."
from An Introduction to Real Estate Appraising,
the Appraisal Institute of Canada