At a recent member event for Rock Star Real Estate out of Oakville, Tom Karadza talked about the true cost of management fees charged by managed funds. 

Tom quoted a recent book he was reading by Tony Robbins “Money Mastering The Game”. We heard about the hidden fees charged by managers.

“Most people don’t do the math, and the fees are hidden. Try this, if you made a onetime investment of $10,000 at age twenty, and, assuming 7% annual growth over time, you would have $574,464 by the time you’re nearly my age[eighty]. But, if you paid 2.5% in total management fees and other expenses, your ending account balance would only be $140,274 over the same period.”

Someone’s making out well in this scenario but it’s probably not you or I.

So if mutual funds by the way of Registered Retirement Savings plan(RRSP) aren’t a rewarding way for Canadians to save, what is?

To reduce the fees I was looking at paying, from purchasing  RRSP’s, I opened a discount broker account at my bank. Which is a way for investors to self direct which stocks and bonds they wish to buy, but without all those fees.

My choices to buy were well  established companies stock at a fairly steep price or lesser known ones that may be equivalent to rolling a pair of di’. I liked the idea of buying funds that paid you back(dividends), however it would take years to make any significant gains and get a decent return on my investment.

Through more investigation and planning, I realized if I saved  that same amount that was set aside for mutual funds and paid down the mortgage on my investment properties I would get a nice return later.

The benefits of owning Real Estate in Ontario are 3 fold.  

1. I am leveraging my intial investment by using 80% of the banks money to about only 20% of mine. So as my property appreciates at around 5% a year(may vary). it’s on a much larger amount then it would be using only my own.
   
   
2. The benefit is that someone else is helping make my monthly contributions by way of paying down my mortgage.
   
   
3. And finally, I can defer paying capital gains(the taxable amount my house has grown in value) indefinitely. As long as I own the house I never have to pay on it’s increase in value.
   

So, in 20 years here is the picture of how my retirement plan falls together. While living in the rental unit my tenants have now paid off my entire mortgage. So after income tax, insurance and repairs, what's left is mine to live on.

Over the years as living expenses has increased I plan on keeping up by making the rental price adjustments necessary. As for my would be RRSP’s hopefully at retirement they would be there when I need them. 

I choose something not so easily evaporated with market volatility!

Here's how to find five star tenants 
and manage your  units like  a  pro!

Landlords, want a fast easy way to increase your cash flow? How about an increase in your rent collected? An increase seems like a quick, easy way to balance the books. So when is it a good time to bump up the rent? The answer I respond with is actually in two parts.

First, landlords can only raise rent on their tenants after a year of tenancy. Typical leases run for an entire year and then, if not renewed are considered on a month to month basis. This is the point you may follow the landlord tenant guidelines to raise it which is subject to regulated caps - or simply put - no more than the prescribed amount for that year. In 2015 the amount is 2.6%.  There are instances where you can apply to the Landlord and Tenant Board for a rental increase sooner (interest rates have changed significantly, the necessity to refinance to cover costly repairs)

The second part of my answer to landlords is should you be raising the rent? Market conditions and comparable properties should be taken into consideration. If you raise the rent too much on tenants who may already be at the top of their comfort zone, they will most likely begin looking elsewhere. This could leave  you vulnerable to unexpected expenses for advertising, paint and other maintenance or repairs just to fill your property all over again. Over time, consistently keeping your units filled is the best way to ensure your investments remain profitable.

Whether you choose to wait for the anniversary date of the lease or apply for an early rental increase, you should always consult the  ltb.gov.ca  site for more information.  Here you can also learn how to properly serve a rental increase notice to your tenants and avoid any unnecessary conflicts.


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