- Canadian Tax Resource Blog - http://blog.taxresource.ca -

Is Real Estate Investing A Good idea?

Your financial objectives [1] should drive your decision. 

As a general guideline you need to determine your long term financial goals [1] first and then structure your investments to help you achieve your goals.  If you are thinking about whether you should keep your current home and rent it out and then buy another in my opinion is putting the cart before the horse.  Determine your goals first and then see if the rental property is worth while.

My thoughts on real estate investing…

While real estate investing is a valid endeavour you really need to consider if the amount of time you plan on putting into it is worth the risk associated with the investment.  The risks of real estate investing as I see them (and this is not a comprehensive list) are:

Finally you should consider your annualized after tax return on investment in the real estate and compare it to the after tax return on investment on a portfolio of all equity securities.  In most cases you’ll probably end up earning more in percentage terms on the market portfolio simply because the cost to maintain the property eats into your returns.  Build a spreadsheet and compare the alternatives.

[2]