The Top Reasons Why Your First Home Should Also be an Investment Property

April 23, 2021 7:00 am Published by Terry Paranych Real Estate Group

Are you thinking about buying your first home in Edmonton? Did you know buying a home that doubles as an investment property can make first-time homeownership all the easier? While many homebuyers will opt to wait until they’ve purchased their first, second or third home before entering Edmonton’s real estate investment market, there are many advantages to beginning your real estate investment journey now.

Here are our top reasons why your first home should also be an investment property:

1. It’s Easier to Get a Mortgage

Buying a home with a rental income suite (sometimes referred to as a secondary suite) can make it easier to qualify for a mortgage. This is because the Canada Mortgage and Housing Corporation (CMHC) allows first-time homebuyers to declare 100% of the rental income when applying for a mortgage loan.

Simply put, purchasing your first home as an investment property will allow you to buy a larger home (i.e. a single-family property instead of a townhome), buy in a more expensive area and own your home free and clear, faster.

Check out: Three Affordable Home Styles For First-Time Buyers

2. You Can (Still) Take Advantage of First-Time Home Buyer Programs

As long as you qualify as a first-time buyer in Canada, you’re eligible to take advantage of the Canadian government’s many first time home buyer programs, which make the prospect of homeownership more accessible and affordable:

The Home Buyer’s Plan – The Home Buyers’ Plan allows first-time buyers to withdraw a maximum of $35,000 from their RRSPs to buy or build a new home. Even better, your partner may also do the same for a total of $70,000 (tax-free) to put towards your down payment.

The First-Time Home Buyer Incentive – Though this incentive does require you to come up with the minimum 5% down payment beforehand, the Government of Canada can help you reduce your monthly payments through a shared equity mortgage.

GST New Housing Rebate – A GST rebate may apply to first-time buyers building their own home, renovating an existing property or converting a non-residential property.

The Home Buyers’ Amount – The Home Buyers’ amount is a $5,000 non-refundable income tax credit which provides up to a total of $750 in federal tax relief.

3. Become Mortgage-Free Faster

Purchasing a first home with investment property potential will also allow you to become mortgage-free faster. For instance, the average rental rate for a one-bedroom basement suite in Edmonton is approximately $835. Depending on current average listing prices, this rental rate can be applied to roughly half of your monthly mortgage payment*.

Alternatively, paying the full monthly mortgage amount on your own allows you to put the additional rental income towards your mortgage principal and pay your loan off at a much faster rate.

4. Build Valuable Equity

Home equity is the difference between what your home is currently worth in today’s Edmonton real estate market and what you owe on your mortgage loan. For example, if you owe $250,000 on your mortgage loan and your home is worth $350,000, you will have accumulated $100,000 in equity.

Not only is home equity extremely valuable in terms of improving your overall net worth, but it can help pad your retirement, borrow money at a lower interest rate and pursue your financial goals.

How can your first home/ investment property help you build this important asset? By paying your mortgage off faster (see above), you’ll also be able to build equity (simultaneously) at a much quicker rate.

5. Always in High Demand

From first-time buyers and growing families to real estate investors and downsizers, there’s no shortage of Edmonton home buyers looking for ways to reduce their monthly mortgage costs. As such, properties offering the potential for additional income tend to increase in resale value over time. Additionally, 35% of Edmontonians opt to rent their homes– meaning your property will always be in high demand among renters, as well.

6. Take a Tax Break

Of course, becoming a landlord isn’t without its expenses. After all, you’ll be financially responsible for fixing certain items as well as maintaining the property overall. The good news is, as a first-time investor and owner, you’ll also be able to take advantage of some serious tax breaks, which include everything from repair and maintenance costs to property taxes, utilities and insurance.

For the complete list of what you can deduct, see the Government of Canada’s Rental Expenses You Can Deduct.

7. Enjoy a 2 For 1 Deal Down the Road

When you’re ready to move to your next home, you may be in a position to double your cash flow as you rent out your current property. And so, the cycle continues as you can then use your rental property income to subsidize your new monthly mortgage payments, pay your loan off faster, build equity, etc.

The additional income can also give you the freedom to pursue other financial ventures such as starting a business, saving for your child’s college fund, boosting your retirement fund etc.

The Terry Paranych Real Estate Group specializes in helping beginners and seasoned real estate investors realize their real estate dreams. Not only will we provide the expert investment-related advice and guidance you need to succeed, but we’ll also help you zero in on the best properties, negotiate a better asking price, turn a healthier profit and much more.

For more information, we invite you to take advantage of any one of our FREE Buyer’s Resources, including:

A Step by Step Guide For Buying Your First Home – Learn everything you need to know about saving your down payment, figuring out how much you can afford, getting pre-approved and more.

How to Create Amazing Wealth: A Beginner’s Guide to Investing in Real Estate – Learn the advantages of investing in real estate, how to organize and secure your finances, how to the right neighbourhood, why you need to work with a real estate investment REALTOR® and more.

*Based on average single-family home prices according to the REALTORS® Association of Edmonton

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Photo credits: shutterstock.com

Tags: buying, investing

Categorised in: First-Time Home Buyer, Real Estate Investing

This post was written by Terry Paranych Real Estate Group