Monday, May 25, 2015

Bob Rennie says "Tax Real Estate Speculators!"

Following a plethora of attention grabbing headlines I find this;

Condo king calls for tax on flipping homes

Bob Rennie, the ‘condo king’ of Vancouver says that there should be a new tax on those who speculate on the property market....

UMMMM...   Hello...

Toronto and Ontario have land transfer tax, if you have previously owned property [anywhere]

This is Payable whenever you buy anything within the land transfer tax system, amounting to $12,500 on a condo / house purchase at $500,000  [say 2.5%]

Our friends from HST  - Those Revenuers - charge you an additional 13% of the final price on any purchase where the property is NON OWNER occupied at closing. (you sign a declaration to that effect)

Let's wave the flag and TAX THOSE FOREIGNERS!

Well,  as a non resident purchasing units for rental [and/or flipping] the Owner must declare and pay income tax. If you are a non resident selling real estate there is a with holding tax of 25% pending your filing a tax return.  NOTWITHSTANDING that you have a challenge to obtain financing (foreigners need higher if not half down payments) the CRA wants a 25% payment on sale.

Very Disappointing to hear advice from Bob Rennie to TAX speculators for we all are speculating on the future of the real estate market in both Vancouver and Toronto. Pensions funds, OMERS and just plain home owners on a pension are betting on their nest egg.

Banks release [stats of] lower levels of deposits and its no wonder with interest yields of .08% on savings and 2.00% long term investments that people are turning towards the 10 - 15% gains made in real estate. The BMO Wealthy investor reports that 27% of high net worth individuals own income property.

Building wealth in real estate and rental units is purchasing and HOLDING LONG TERM whereby a tenant pays off your mortgage over 25 years and you have a performing asset.

Simple example;

$300,000 in the bank at 2% earns you  $6,000 this year

$300,000 in a condo purchase pays you $18,000 this year, but you need to manage, pay maintenance and taxes.

I see a clear choice.

What do you think?