Where is the 'CRASH'?

I'm still a little confused as to when this "crash" is going to take place.

It seems like every week, you see another article in the Globe and Mail about the impending crash and chaos that is about to breakout in the streets.  Crews are standing by to clean up the blood and aftermath of this terrible spiral of the housing market.

So...any time now!

Yes, certain segments of the market have softened : See "Condos"

But the majority of major markets, save for Vancouver, are still seeing rising prices, bidding wars and houses going for 'over-asking'.

Here is an article regarding some of the bidding wars in Toronto:

http://www.theglobeandmail.com/life/home-and-garden/real-estate/you-want-that-home-join-the-line/article11543034/#dashboard/follows/

Notice how specific the market is that they talk about?  "Detached Homes"....

Funny enough, the same thing seems to be happening in Guelph.  A friend of mine is moving from Thunder Bay to Guelph and is currently looking for a detached home in the $350,000 range...and it's becoming very tough.  Houses are going over asking even here!

This seems to prove me right, that there is no such thing as the "Canadian Housing Market".  Each market, segment, neighbourhood and housing type is unique.

Experienced investors "look behind the curtain" to see what is really going on.  They look at the specific market factors regarding the subject property and manage to block out the 'noise' from the media and naysayers.

You should do the same.

Is Renting Your Basement a Good Idea??

Many of you have likely seen “Income Property” on HGTV and already know that renting out a basement in an owner-occupied home is a good idea in most cases, but what some of you might NOT know is that doing this also comes with some great tax benefits!!

Everyone hates paying taxes…so why not keep more of that money in your pocket?  Things like mortgage interest, utilities and other general repairs can all be deductible to some degree…you just need a simple calculator.

“FIXED – expense deductions” are based on square footage measurements of your apartment in relation to the portion of the home that is owner occupied.   Examples of fixed expenses are mortgage interest, property tax and insurance.   If you live in a bungalow and the basement is the same size as the owner-occupied space, your expenses will be 50% deductible.  However, if you live in a 2 storey house, with the basement taking up 1/3 of the total floor area, your fixed expenses will be 33% deductible. 

“VARIABLE – expenses deductions” are based on the amount of people in basement compared to how many people live in the owner-occupied unit.  Examples of variable expenses are utilities, cable and internet bills.  If a couple live in an upstairs unit and rent the basement to 1 person, variable expenses (like hydro) are 33% deductible.   However, if you have 2 people in the basement, hydro becomes 50% deductible!

Repairs to the basement unit that have no impact on the upstairs unit would be 100% deductible.  Repairs to the building that have an equal benefit for both units (roof repair for example) would be 50% deductible.

To get a better picture, I have decided to use my own financials to show you a snapshot of income/expenses/taxes.

Basement income - $830

Deductible expenses:

50% of mortgage interest - $400

50% of insurance cost - $35

50% of property tax - $137

33% of hydro and water bill – $56  

33% of gas bill - $20

33% of internet/cable bill - $50

 Total deductible expenses - $698

This means I’m paying tax on only $132 per month, which is roughly $40.   Therefore, my after-tax income is $790.

The best part about these ‘expenses’ is that I would have paid them all regardless of if I had rented the basement!  I still have to pay my mortgage, heat the house and pay the cable bill!  The usage for hydro, water, might go up slightly, but it is not much at all. 

To put this in perspective, to earn $790 after-tax income….that is 60 extra hours of work per month @ $20 per our ($1200 – tax = roughly $800)!!!

 Hopefully that was clear enough.  I’m not a tax accountant so please feel free to give me your thoughts!