| ‘for the. Communicator: er ee ee at x ar ‘ 2 ., \ , ‘ ry . cal be aad K ; f van x a iH 4 : i 4 oy, ' . ot ‘deduction : 7 Davia Ingram, renowned. tax . c consultant, ‘fi nancial _ advisor and . founder ) ‘CEN-TA, “Canada’s ‘Largest’ . Wholly - Owned Tax Service”, ‘writes “about housing ~ Should You Buy o or Rent Your Home? The ans-. wer depends more upon your lifestyle and size of | family. than the ecoriomics of. the situation. For the most “part, it is. ‘possible’ to rent a _ $60, 000. house for: $400: to $500 per month at 11%% interest and with a 25-year amortization,. the. payments _ for Principal - and: Interest” on a $60,000 mortgage.aré $629. 40: per. ‘month. “Add. . . another $150. for.’ AXES. and: maintenance. and’ you « - “But I have a $30, 000 down payment.” ”, Th you have then lost: the use. of the $30, 000 payment, so the end result is the same. -J_ often run into the: situation where a “family” flown with three. children: is out of. the ‘housing market a and renting. because: when: they. sold" ‘their: house 4 in. Edmonton. or: ‘Toronto, and moved : to: Van- ". 7 really “behind, the. 8-ball”, L “Sugeest: they. look. a - their own: ‘situation’ ‘5, 8. 0r 12 years from now when’ at. the very: most onlyone child isleftat home.: we! “ . What our ‘family. can’ do. is; say, “While we ‘can- | not afford ‘the $780 outlay per-‘month to buy, we. “do: have $4, 000. ‘to $10,G00-left .over from our - house in Regina.” We ‘could: ‘buy two -$35,000~. ‘condominiums ‘and. rett them out. to.others to get ‘back in the -housing: market.” It is ‘my _ opinion * that two $35,00G. condominiums will grow | at a _. faster rate, ‘than..one’.’$70,000; house, as; ‘more. people ‘can afford them, and: ‘our small oversupely at: the present time: will quickly be used. up. | Sample Renting of a $35, 000 Condomiiium ae “mortgage of $31,000 at.12% for 25 years amor-" _ tization, payments of .$333.08:, -per month, and... monthly costs: (repairs +: ‘maintenance: + taxes): at | $82 per” month, Total snonthly. Payment caval S415. ; Rent out for $325 and ssiose”” $90 per. month,: a This is where everyone. breaks ‘down, because: ‘he - 3 resents “someone else living on my money”: You _ have to realize two things. The $90 loss is'a ‘tax. - and, depending: on your. yearly in-. come, could. get you a refund. of $30 to $50 per. . month,. You are | going to: raise - ‘your. rent, ‘and. .. every time the rent goes. up on. the:3° bedroom © $70,000 house. you are living in, you' can raise the rent on your condominjum. | : | A Prediction: a ee — AL will make ‘a 25-year prediction based: on’ ‘the. _ last 40 years.. I see no reason for the sitiation to. pu Not:As'It. Appedss i. - a ee , the stool market. ren - change, and L will make | a mockery’ of the land-— lords who are arguing. against rent: controls: I am : assuming that mortgage interest ‘will, remain - a. - round 12% and that inflation will-be.from 8 -12%:. ; —If-inflation drops below. that figure; the’ mortgage. payments will drop: with a re-negotiated. interest _ rate, but even if inflation is only: 2%, rents. will - » Keep on going up. - Pgid: out for Principal and ‘Interest 3 ($333.08 per month x 300). -§ sein | - Paid out for Repairs;Maintenance, 9° ‘Faxes, etc. (82°x 12 = $984 Boe increasing at 12% per year) 131,200.00. - Total Paid Out | $231,124.00 - Rent. Received ($325 x12= 83, 900 — : - increasing at-8%. ‘per.year) ©. “$285, 113. 00 Value: of f building a at 8% per year _. 239,696.00 ; © $524, 809.¢ 00 Gross 5 Profit’. | es ne - (assuming building sold at this is time) $293, 685. 00 Remember, if the building is 5 not: sold, “there. iS no capital’ ‘gains | tax, and you: shave: a’.$250, 000 building or piece’ of property working for you.” ~ The comparison. ‘now is: 7 To ‘buy...a'*$60,000° to. "$70; 000 house: at least “$15,264 ‘of ' ‘earnings. is: required. for house. alone. and: this -does not“ include ‘repairs and: mainten- “arice; ‘property: insurance: or. improvements, all of. which: are not deductible. ii- “To rent a $60; 000. to. $70, 000 house. it takes . 39; 816° ‘of: earnings. All other expenses for. rentals: are. deductible and should’ require only. another — St ‘200°: ‘per: ‘year. In. fact; ‘we can likely compare "$20; 000: to- $12, 000 and have as much or more real. estate: ses for. us. and. ‘get the. equivalent . 00 n.sh rt, réinember that ail i is $ not! ‘as sit: appears.” Right now, it is possible to rent 4. $250,000 house. _in the ‘British’ Properties ‘for. $1,000. per. ‘month: » and: if you bought six: $40, 000: condominiums, 7 you: would’ be far,. far: ahead of. thes ‘game; : The’ :onily’ ‘problem: ‘you. “will: ‘have: in. renting i is-- “that the: house, owner: is likely. to: want fis house "back. oe “You: ‘will: have to. move and. ‘find aiothiar plice’” a “and your moving. expenses, are: not deductible. in - ~ Assume down: paymient ‘of $3, 500, jeaving | - that .case (they may: be‘ jf you: move: ‘more: Shan: 25 miles to take a new, Job). - car ; olf you: ‘alieady -own a: house and want a good “‘favestment, ‘the’ ‘best’, one, you" ‘can’ make. is ‘a ” second | living: “space, which : ‘you rent out. If you. have, a.good: friend: buy: a:$100,000 house, rent - _it-to ‘your: friend, and deduct ‘the: expenses. Then . have him: rent you ‘a $100, 000"house, If you see: that “dream house”: :you want but can’t afford,. __buy, it. and rent it. until. inflation | ‘catches, up and. you can afford to. move,into jt: Ifyou have: equity, . in your present, home, ‘it 18" good money manage« -; ment to’ ‘borrow’ it-out ‘for this purpose: (That “is, - acauute a. second. mortgage). “Just ‘aon’ t put it kato Some se ipire mets E “ will:be wortlt $372,009 1 If evérything..remains. ‘the same - tax-deduction. If you presently: own: . house that is ‘Mostly ‘paid. ‘for°an ys > large. mortgage: on your: personal house ‘switch it _. around, . Make ‘sure that. all mn oi aol fori investment Purposes. . Method of Success _ houses, a. duplex in. Richmond, ahr their new. ‘house until the old: one i “inflation will-continue < at 2109 ‘inste: >. trols remain: at. 10. 6%, the | + a be. $419,000 rather ‘member, ‘under. this ‘prog “tent. goes” up” ‘on. the. ‘hous re : _ is good ‘news, as you can raise the'rent-. on your- . ‘condominiums. ‘Incidentally, the: rent tends. to” be _raised- less on houses ‘than: on‘ apartments . because the house_is already. higher ‘and the - tenant is cutting ‘grass, etc. and” hopefully, _ _contributing more to the. investment; . ~The | ‘next .question. is, “7 am “paying. $450. a. month rent on the house I ‘am’ ‘living. in. I. am _ paying out another. $180. per month. to. subsidize _ othe two condominiums. | I. have: lost. the ‘use of $7,000 of money, which. is. ‘another -$60 per ‘month; and I -am -still- paying © “out. -$700- per ‘month without living - in my, Own: house. Why - -don’t I just scrimp and pay-out: ‘the - $790 we. started with and“forget about all: the hassles?” - _ Well, the amount: $790 is ‘based: -oif2 a. $60, 000 house. For a $70,000. house that figure. ‘would. ‘change to $910 or “$925. But: it is-the: after tax dollar that: counts: To Pay. out. $700 er: ‘month, gets worse at "$800 and $3900. ay for $26,000 per, Year: \To pay for the rental-house'at the ame in- come level, we only :need'to earn’$818, ‘pay: "$368 tax to have $450 feft.for.the rent..We: don’t have to pay tax on the $60. interest: we were. receiving so -we save $324 in income tax’ and.the (2: x 180) - $2,160 we paid out to subsidize, the: rentals: Bives usa further-tax refund of $972... Tf you are going. to’ borrow - some: inoney to invest like this, the. interest’ you. pay- out is a. & arental Last’ ‘but’ not, least; what Yr “ani. i talking about ‘here is based. upon, thousands, of: personal, ‘inter- - views: cwith | ‘people. and I: call. it'-the: accidental method: of ‘SUCCESS. ‘Strangely enou} itis: ‘also, i in 90%’ of the ‘cases, “the: only’ method: " "SUCCESS. , Most people . T..talk :.to; ‘achieve™ stiegess: through their: real estate: holdings: Tam: ‘not talking. about ' 24.suite apartment’ blocks, but one ‘or: twos small €£0:.CO) ‘ jums*in’ “White | ‘Rock;"a: “summer: ‘cottage =. Salt- spring Island that’ everyone ‘thon ght they: ‘were _ crazy. to. buy.’ This is not.an ‘accolade, and ¥} ‘was not asked for ‘it, but the North Shore:Credit-Union has: ‘helped many people : to: this “aétidental siiecess””,” ‘by. “financing: their. cottage, giving. thei’ a: ‘Joan: ‘to buy ‘sold; ¢ etc. We all know: someone ‘who did: what «Tain: ‘talking About. Realize: that it may haye been'by’. ‘accident, * “but isis also‘a: superb: investment’ “technique: : Imn- Migrants to .this: country | know, and: ‘respect . the value’. of ' owning: ‘your owl | ‘HONIG. Sand: 1 con- tinuously. nin across young: Eurdpéans’ with a - ‘yental hotise” which: someone’ else: is:’paying © for while they sharé ‘an. apartinent with: someone “else. T used to think: it was crazy lo ongor do. “If you ‘are moving do not sell: yourold: tiome. : Keop it and rent it ‘out. It: willbe: or alnaie, ‘best ; Anvestment you, ever, madée ‘Tf. you, don't have. a