Why Real Estate vs other alternates?
Cash Flow
One of the attractive benefits of real estate investment is monthly cash flow, the money left from rental income after all expenses are paid. Investing in properties with monthly cash flow allows investments to still be profitable even if a market is down.
Appreciation
Appreciation is the amount that your property increases in value over time. You buy property when it is down and sell the property when the market is high. The average historical Canadian home prices have historically increased 6.5% per year.
Loan Pay Down
The amount paid down of mortgage principle each month by your renters is called Loan Pay Down. You purchase a property with the majority of the investment coming from lenders, however, the loan is repaid by renters and not out of pocket to the investor.
Leverage
With real estate investing you are primarily investing with money from a lender, such as a bank, not your personal money. You receive profit from this money each month when a renters pays down a percentage of your mortgage (the mortgage is money Leveraged from a lender). A portion of the rental income pays interest on the loan and the remainder is toward the principle of the loan when you pay your monthly mortgage amount. Over time there is significant equity built.
Forced Appreciation
The next advantage of the real estate investing is Forced Appreciation. You can improve a property and increase monthly rental income and force appreciation. This is often seen as a benefit to investors as you can control this rather than waiting on the market.
Tax Advantages
Each individual has their own tax situation and should consult an account to determine if there are eligible tax deductions. There are two potential scenarios for deferring taxes. The first is the potential to claim capital cost allowance and the second is when you do build equity in your property there could be an opportunity to borrow against that equity to access money to buy another property without triggering much in taxes however, as mentioned, this would be done with advice from your accountant.