The year was 1956 and the Canadain Government came up with a novel new way of helping Canadians save for retirement - the Registered Retirement Savings Plan - or RRSP. It was meant to safeguard the future for senior Canadians, and lessen the burden on the government-run Old Age Pension Plan. Canadians could yearly contribute to a savings program and receive a tax benefit in the year funds were desposited. It seemd like a fantastic system!
60 years later, we can see the benefits and also the problems with that system. Individual plans have been subjected to the vagaries of the Stock Market and it's been a wild ride for those holding RRSPs - many years of slow growth, some spurts, and some devasting market corrections that have wiped out significant chunks of retirement income that many, who invested early, were counting on for their retirement. It hasn't been the steady secure safety net that was promised and hoped for. Many seniors are now delaying retirement, unsure whether they've saved enough to provide the lifestyle they had hoped for. And every stock market downturn has them checking thier protfolios to see how much damage has been done.
Is there another way?
What if the same indiviuals had invested in real estate from 1956 onward? What if, instead of yearly RRSPs, folks had saved up instead for a 25% downpayment on a rental property and signing up for a mortgage with a 25 year amortziation? Mortgage rates have changed over the years - both up and down. But property prices have steadily risen as have rents. Typically, at 33% ownership, the rent alone is enough to cover the mortgage and the taxes, leaving a positive cash flow. What if more properties were acquired over the years in lieu of RRSPs? Today that same Canadian facing retiement, would have 2 or 3 income properties - each of which had 67% of their mortgage paid off by the tenants of that property. How nice is that? And each of those properties would be geneerating monthly rental income for the owner. Best of all, the value of those properties has mostly doubled every 10 years in this solid Toronto market. Can you imagine???
Hind sight is 20/20. Looking back now is critical for smart Canadians looking to build wealth for their families and future retirement. The benefits of owning rental property, I feel, far outwiegh the small yearly tax benefit of contributing to the RRSP program. If you one of the lucky ones to have enough income to do both, surely you are priviledged. But most Canadians do not. We need to decide where to put our $$$ so they'll grow and build wealth.
Is every rental income property better than other investments? Of course not. I help many investors and I carefully analyse the property, the area, the growth potential... You want to properties with the 'right' attributes - and track the investment over the years for performance.
if you'd like to know more about this system of building wealth, I'd be happy to sit down with you and walk you through it. Ask me anything... Just call me at direct 416-459-1122 and we'll set up a confidential no-obligation meeting.
Your future is in your hands....
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