As the price of houses and apartments has increased significantly, it no longer makes sense as an investor to purchase properties for the purpose of having a rental business. At these sky high prices, the rental income will not even cover the mortgage, and interest rates could still rise.
Another investment strategy:
Take out $300,000 mortgage on your own property
Subscribe to the Motley Fool Canada Dividend Investor Service to do your research, and use the $300,000 cash to purchase a portfolio of Canadian dividend stocks.
Use the dividend cash to make mortgage payments and for extra cash.
After 25 years, the mortgage is paid off completely and you have a large retirement stock fund, that paid for itself.
The risks are that your stocks will drop in value or you lack the financial discipline to hold onto the stocks and collect dividends.
Buy stocks at the 52 week low, and be convicted of the financial plan in order to mitigate these risks.
Now, it is December 27, 2018. The stock market has dropped significantly, and stocks can be bought at a bargain price.
I am also an accountant.
If you take out a mortgage for the purpose of investing in stocks, all the interest paid can be deducted on schedule 4 – carrying charges on your personal income tax return. This is a tax secret that people show off about getting away with. Make sure to instruct the mortgage advisor not to mix your stock investment mortgage with other regular mortgage loans.
Also note that while REITs tend to have higher dividend payments, their dividends are taxed as other income and are not considered eligible dividends, so they will be taxed at a higher rate, because REITs distribute 90% of their net income and reduce that net income from their income statements.
Bank of Nova Scotia – typical big Canadian bank, but it is expanding into South America and has more growth potential. The other banks all expanded to the USA, which is already saturated. 4.61% dividend, stock price dropped a little bit.
American Hotel Income Properties – hotels in USA and motels near train stations. 11.75% dividend. Stock price dropped about 25%.
Ciniplex – major movie theatre company, can afford to pay 6.3% dividends and have plenty of funds to invest in diversification. Stock dropped 30%. Has market dominance.
Chemtrade Logistics Income Fund – stock dropped 50% and has 11.74% dividend. Sells chemicals
Pinnacle Renewable Holdings – sells wood pellets for power generation to Europe, stock dropped 40% and has 5.19% dividend.
Apple Hospitality REIT – hotel REIT in the USA that has medium quality hotels. Recession proof as people go to cheaper hotels in recession. 7.75% dividend. Stock dropped a little bit.
Dream Industrial Real Estate – warehouse REIT in Canada and USA, 6.64% dividend rate. Warehouse REITs are growing because of e-commerce, which needs warehouses.
Crius Energy – fast growing US utility company giving 17.35% dividend yield, stock dropped 25%
Chesswood Group – leases commercial equipment and provides loans, 7.66% dividend
Brookfield Renewable Partners – 6.85% dividend, renewable energy company
Freehold Royalties – owns and leases oil royalties, 7.14% dividend
Pivot Technology Solutions – 17.02% dividend, Sells IT hardware and software solutions.
Inovalis REIT – rents out office space in France, 8.31% dividend in Euros
Dream Global REIT – rents out office space in Germany, 6.27% dividend
BSR Reit (HOM.U) – rents property in southern USA, discounted price as it is a new REIT, 5.88% dividend