Common Risks Involved in Real Estate Investments

Though most of the real estate investors will say that the business has rewarded them with very high returns, there are some potential investors who will admit their failures in real estate investing. This means that the business is a risky one and not each and every deal will prove to be successful. There are so many risks involved in real investing which you need to be aware of before getting into it so that you can prepare a safeguard against them before they result in a loss.

Discussed below are some of the most common types of risks that are involved in real estate investments. Let us have a brief look at each one of them in detail as follows.

Falsified Sale

This is one of the most common types of risk that is faced by many real estate investors. There are many people who fool investors by offering them with such a property which is either not owned by them or they do not have the rights to sale that property. If this is the case and as an investor you seal the deal without verifying the ownership of the broker it will put you in a great trouble. Besides this, you will also have to lose the money that you may have invested in it resulting in a great loss.

But, this risk is manageable if and only if you take time and research well about the broker or the client who has come with the offer. Once it is confirmed that the ownership of the property is entitled to the client then you can go ahead. However, if you find that the client is faulty then it would be wise to take legal against that person.

Improper Construction or Building Component

There is a possibility that the building materials such as cement and bricks used by the builder or the construction company would be of low and poor quality. This will not only damage the property very soon but it can also prove to be fatal in its worst case. This might put you in great trouble and also build up a negative remark in the real estate market.

To overcome this type of risk in real estate investment, you must inspect the property very well. You can also ask the builder to provide you with a copy stating the quality of building material used for the construction of that particular project. In addition to this, performing regular maintenance checks will also save you from such risks.

Risky Tenants

Investors who rent their property often come across this type of risk in the real estate market. Not all the tenants will take good care of your property and keep it well maintained. For instance, they will handle the furnishings and other accessories carelessly and damage them thereby increasing
the cost of maintenance.

But, you can avoid this kind of real estate investment risk by scrutinizing potential tenants. Make sure that you verify the background of the tenants before handling the property.

Underestimation of Value of the Property

This type of risk results in a great loss when the investor underestimates the value of its property. To become a good real estate investor, it is very essential that you estimate the property’s value right. Features like geographic location, proximity with the market and places of work and entertainment, number of rooms, and total area are some of the most important points you must take into consideration while deciding the value of your property, be it for selling or for renting. However, if you fail to take a note of all these factors and tag the wrong value, it will be you who will have to suffer its consequences. Therefore, it is very important to ensure that the property generates enough of cash so that it can not only provide you with good returns but also supports itself very well.

These are some of the most common risks involved in real estate investing but none of them are unmanageable. By taking precautionary measures and following the mitigation strategies mentioned above you can easily eliminate them and make your real estate investments very cost-effective and satisfying.

Source: http://www.homeloanassociates.com/common-risks-involved-in-real-estate-investments/

A Guide to Canadian Real Estate Tax Payments

When the global housing market was going through some tough times in the recent past Canadian real estate market was enjoying a decent growth with impressive sale figures and pleasing property prices. The real estate sectors in major economies like the United States, Eurozone, Japan, etc. have declined considerably for the past several years especially after the Great Recession of 2007-08 in which the world came across a global economic decline. However the Canadian real estate market remained majorly invulnerable to this event and continued to grow and expand further.

Experts believe that the golden era of prosperity and success of the real estate sector will continue for the year 2013 as well if investors maintains precision in their investment. Buying property in Canada is profitable when you possess a better understanding of the Canadian tax laws that are applicable under real estate investments. It is not necessary for investors to be a Canadian citizens for making investments in the property sector. Immigrants who are willing to invest in Canadian properties can buy assets on a temporary basis by fulfilling certain immigration criteria.  Immigrants eager to invest in rental properties can do it by first applying for annual tax returns with CRA (Canadian Revenue Agency). 

Moreover when you buy property in Canada you will have to pay provincial property tax that differs from province to province. Federal Goods and Service Tax (GST) is levied on new home purchases and is not applicable on the resale of properties.  While selling back property, Canadian government takes 50% of any withholding tax from non-residential sellers. Besides immigrants need to provide a clearance certificate issued by the CRA, and the buyers will be personally responsible for any unpaid taxes of the seller. Canadian residents are not taxed on gains and profits incurred from selling properties. 

There are several other province and locations specific laws which are quite substantial and flexible directed to make real estate investment easy and profitable for investors. However for the successful running of property investments, investors must be aware of the all the rules and legal guidelines and act accordingly. Investor must also gain knowledge on the numerous tax implications during the various phases of property investment from buying to renting or inhibiting, and finally selling of the property.