Über die Autorin bzw. den Autor

Don R. Campbell is the author of the Canadian bestseller Real Estate Investing in Canada, a book that all real estate investors should have as an action tool and reference. A staunch advocate of the Authentic Canadian Real Estate System (ACRES), Don is president of the Real Estate Investment Network (REIN). REIN membership exceeds 3,000 successful Canadian investors whose investment in Canadian residential real estate tops $3.1 billion.

At real estate seminars and live workshops held across the country, Don shares his years of hands-on experience as he teaches strategies he has personally tested in the real world. Through REIN (www.reincanada.com), Don has helped investors achieve their dreams. Some of the most notable investor stories were the foundation of another of his books, 51 Success Stories from Canadian Real Estate Investors. Along the way, charities such as Habitat for Humanity have also benefited from Don’s enterprise.

Navaz Murji is a Certified General Accountant (CGA). In 1992, he moved his nine-year-old accounting practice to Burnaby, B.C., from Edmonton, where he had already started investing in real estate. Today’s practice, Murji & Associates (www.realaccountant.com), maintains a strong emphasis on owner-operated enterprises, with 48% of the client base composed of real estate investors. Navaz also maintains his own real estate investment portfolio that contains several multi-family buildings developed with other investors.

George E. Dube, Chartered Accountant, established what is now known as Dube & Associates Professional Corporation, Chartered Accountants (www.dubeandassociates.com) in 1997 after several years with national accounting firms. A veteran real estate accountant and investor whose practice focuses on providing the knowledge and tools clients need to increase the value of their businesses, George is a frequent guest speaker at Ontario REIN meetings. George and his team represent Canadian clients as well as clients from other countries who invest in Canadian real estate.

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Keeping your books in order and your taxes minimized are crucial elements for profitable real estate investing, and it’s vital for real estate investors to take an active role in their administration. 81 Financial and Tax Tips for the Canadian Real Estate Investor offers clear direction and applicable examples to unravel these often complex issues that are key to maximizing your revenue and reducing your taxes. This isn’t a guide to tax evasion or dodgy accounting. This is a guide to understanding the limitations, requirements and benefits of the Canadian system and making sure that they work for you, the investor, and not against you.

Different forms of property ownership and property type bring with them variations in how they must be accounted for in your books and the taxation rules associated with them. These differences are not the responsibility of your accountant or lawyer, they’re yours. 81 Financial and Tax Tips for the Canadian Real Estate Investor is an accessible guide to tax and accounting and how these concerns intersect with your real estate investments.

If you’re serious about your real estate investments, 81 Financial and Tax Tips for the Canadian Real Estate Investor is a vital resource that will help you maximize your revenue and keep more of that money in your bank account.

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81 FINANCIAL AND TAX TIPS FOR THE CANADIAN REAL ESTATE INVESTOR

John Wiley & Sons

Chapter One

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Tip #1: The truth about death and taxes.

You can't avoid death. You can't avoid taxes. Now get on with running a profitable business.

Way too many novice real estate investors get caught in a trap that links tax-avoidance strategies with business success. A wise investor turns her back on that approach and knows exactly where she wants to park her business bus: Since wealthy people pay large sums of money in taxes and poor people pay very little, you will want to focus on running a business that makes money.

Parts 5 and 6 of this book will guide the reader through the Canadian tax system. In the meantime, it's good to remind ourselves that taxes are a fact of life in Canada, where three levels of government collect taxes. The federal government collects taxes via income tax based on your income, personal and corporate sales taxes (GST, alcohol, fuel, cigarettes, etc.), corporate capital taxes (based on your assets, not income), and various fees such as EI, CPP, licensing, royalties and more.

Provincial governments collect income taxes that generally blend in your federal income taxes, sales taxes (except Alberta), corporate capital taxes (based on assets or liabilities) and various fees such as royalties and licensing. Alberta has some components of tax that are independent of the federal government, and Quebec collects its own taxes.

Municipal governments generally collect property taxes, business taxes, builders' fees and licensing fees. There is very little connection between municipal government and your income taxes paid to the other two levels of government.

Key Insight

Governments do not have money. All of their money comes from some form of taxation. Individuals and businesses essentially act as government "trustees" in that they pay the costs associated with collecting taxes and then remit the money to the government. A good trustee knows the rules!

Sophisticated Investor Tip

You are in business to make money

The majority of taxes are pro-rated based on the amount of income generated. Sophisticated real estate investors recognize there are two ways to make money: you can trade time for dollars through employment or running a business, or you can learn to make your money work for you and reap the benefit of passive income. Real Estate Investing in Canada shows readers how they can transition from paid employment to full-time investing, or incorporate a part-time approach that's respectful of the individual investor's tolerance for risk.

Regardless of where you are on that spectrum, always remember that you are in business to make money. As an investor, this means you must assess the risk and take investment action when warranted. Investment decisions should be viewed over a long period of time (10-to-20-years minimum) and should never be focused on schemes that aim to avoid taxes. The real purpose of investment income is to get rich, slowly. This approach takes all of the "excitement" out of investing because it focuses on using tried-and-true investing approaches.

For a refresher on the fundamentals of a tried-and-true investing approach, review Appendix 1. The information gleaned from the Property Goldmine Score Card is essential to risk management in a sophisticated real estate investing system.

Red Flag

When it comes to tax shelters, be aware that investment schemes marketed as "tax shelters" are not all created equal. Generally speaking, where a loss is projected at some point in the first four years of a real estate project's life, the project is a tax shelter for tax purposes. But look behind the curtain. If the investment is not ultimately expected to make money, why are you investing in it?

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Tip #2: Assemble your team.

Every decision you make has implications for financial management.

Real Estate Investing in Canada identified relationships as an essential part of real estate investing, with real estate agents, bankers or brokers, lawyers, accountants, property managers, tradespeople and co-venturers or co-investors, all supplying key components of a sophisticated real estate investment business team. So, gather your team, but always remember two important points:

1. You are responsible for every decision made; and

2. Every decision impacts financial management as long as it has the potential to affect profitability and the cost of doing business.

Key Insight

Empower your team. Once you develop your team and the relationships are starting to strengthen, get out of the way! You provide the direction and parameters, but let these key members do what they do best.

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Tip #3: hire a qualified accountant

Close and convenient are two of the worst reasons to contact the accountant-next-door!

An accountant with expertise in real estate investment will save you money by providing advice on tax strategies and sound bookkeeping practices. To make sure you're adding the right accountant to your investment team, novice investors need to ask prospective accountants a few questions before they bring them on board. You must determine if the accountant owns or has owned real estate as an investment and has clients who are active investors.

With email, couriers, phone meetings, web meetings, faxes and virtual offices simplifying real-time connections regardless of geography, the location of your accountant's physical office is much less important than his or her experience and availability. Sophisticated investors work with accountants whose client portfolios include a considerable number of active real estate investors. You get people who know what they're doing when you hire people who are already doing it!

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Tip #4: get to know how the process of An accounting practice works.

Data compilation and the ability to meet deadlines matter, but you also want someone who can help you use that information to plan your professional and personal future.

Accountants charge by the hour or the job, and are deadline driven. As a sophisticated real estate investor, it's your job to look behind the hourly rate and determine if you are getting value for service. To do that, you need to understand that a great deal of an accountant's practice revolves around the compilation of data they need in order to fill out forms for personal taxes, corporate taxes, GST, and so on.

You will want an accountant who is...