Buy and Hold

by Peter
(Toronto)

Hi,

I would like to know more about what the best method of maintaining equity in you investment properties and planning for the future. I guess, I am seeking for a strategy, which will allow me to continue to generate wealth and also minimize potential capital gains and tax implications.

My understanding is that most buy and hold investors refinance their investment properties, and utilize the equity to finance other investments. This seems to address the continued wealth building strategy. However, I am uncertain how this helps minimize capital gains and tax implications? Can I assume that the only strategy for taxes when it comes to continued property investment is DEFERRAL?


Thank you,
/Peter.

Comments for Buy and Hold

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May 20, 2011
 RE: Buy and Hold and Real Estate Taxes
by: Tom Karadza

Hi Peter,

When you refinance an investment property you don't have to pay tax on the funds you're extracting because technically it's a loan (to yourself). So it's a great way to roll your equity into other investments. Of course, we're not accountants so check with one before you do any such move! But we're very confident on this.

Also, once you start building a portfolio it may be worth the extra costs to roll your properties into a corporation where you can pay lower tax rates and use dividends to extract cash.

Hope that helps a bit! Basically, start meeting with a few accountants and ask them these questions until you feel you've found one that knows what they're doing.

Tom

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