Real estate is booming in Canada and even more so in major cities like Toronto. With home prices being at an all time high, it’s often difficult to evaluate the financials behind the purchase of a house or a commercial property. Navigating this space by yourself could be time consuming and extremely confusing while many factors could make how much this purchase will actually cost you in the end. Real estate accounting services are typically recommended with the purchase or sale of a property / building.
Do you need a real estate accountant?
In Canada, there is no law that specifies the need to consult or have an accountant when you are purchasing or selling property. In most cases however, doing so will help push multiple factors in your favor such as:
- Getting pre-approved for a mortgage or a loan
- Obtaining a proper valuation of the property
- Presenting your financials to your investors, mortgage broker or bank
- Getting familiar with real estate tax and property taxes
- Finding the best way to structure the purchase or sale
- Finding the most suitable mortgage rate for you
In the case of a real estate agent or business operating in the real estate market, having a accountant on your side will ensure that you maximize your investments and minimize the costs and tax repercussions.
What do real estate and property accountants do?
The job of a property or real estate account is primarily to help you get the most out of your transaction. If you are buying property you want to know how you can maximize your loan without putting yourself in financial trouble. You also want to understand the difference in mortgage rate types and get a good idea of how much you will be paying each month.
When you want to sell, a property accountant will work with you to maximize your return and reduce the impact on your taxes. This is only one of many benefits of hiring an accountant to file your individual taxes or having one for your small business.
Real estate accountants are mortgage specialists
The right mortgage can make a massive difference in how much you are actually paying for the property in the end. Real estate accountants are professional accountants that take a look at your finances and establish the best type of mortgage structure for your specific situation.
This sort of service ensures that every step of the way, you understand all the possible impacts of your mortgage. Wide-reaching advisory means that your real estate accountant is looking at every potential ramification and opportunity.
Whether you are applying for your first mortgage or refinancing an existing one, a chartered professional accountant is there to help you through the entire application process. This includes making sure your information is accurate and up to date to guarantee you get the best mortgage possible.
For self-employed individuals or business owners, getting approved for a mortgage can be a bit more daunting as you will likely need to provide more documents and records from your operations. Knowing what you will need and how to prepare these documents will be a great help in simplifying the process altogether and increasing your chances at an approval financing.
Real estate accounting services are there to evaluate each mortgage option and what it means for your current and long-term wealth goals. You will then understand where the mortgage fits into your investments and the management of your overall wealth.
Understanding the short and long term impacts
A major reason to consult professional accounting services is to better understand the impact of a mortgage in the short and long term. As we emerge from a global pandemic, getting a mortgage is going to get harder as rates will likely hike and banks now have to administer additional stress tests to new homebuyers.
Getting all your financials in order with the help of a real estate accountant is the best way to maximize your chances at becoming a homeowner in this day and age.
Professional accounting to help you answer common questions:
What’s the difference between fixed and variable rate — which one is right for me?
There are advantages to using both fixed and variable rate mortgages based on the situation and intention. If you borrow $800K using 30-year amortization the variable option could save you $337 monthly. But if you wanted to refinance your home this situation could become more complex.
When a bank lends you a larger mortgage it might not even offer you an ARM-grade mortgage at this rate. Do not compare this to any real-world situation of switching to fixed rate mortgages. If you think the Bank of Canada will increase the interest rate 8 times this year a good comparison is necessary to see if it’s even worth it or not.
Is the interest on the mortgage deductible?
If someone breaks a higher fixed interest mortgage to reduce a lower interest fixed mortgage you probably have a high penalty for a mortgage violation. If a penalty is deductible as an expense, the penalty is also less costly than the penalty that is not tax-deductible.
You should consult a real estate accountant and find out more about each rule before starting anything. Because a single company writes it away doesn’t mean that it can’t be paid after tax. If you break an investment mortgage for the property you want to repay for personal debts, it may make this penalty more taxing. If the tax is not tax deductible, the cost is less.
In Canada, the interest paid is not a tax deduction like it can be in the United-States, however, if you run a business and pay interest on a mortgage, the interest remains an expense.
Tax specialists for real estate investors and landlords
The Canadian law on real estate is pretty liberal in terms of ownership. Non-residents can also have rental properties in Canada but they must file annual taxpayer returns. FinanTech Accounting provides a plethora of tax services for real estate investors developers, builders and contractors.
Your personal property accounting agent is an industry leader that can protect your interests and encourage you to make smart real estate investments. We can analyze key financial ratios and prepare loan applications.
Getting valuable real estate tax tips
The Canadian Income Tax Act allows Canadian taxpayers to deduct reasonable expenditures that are for the purpose of earning business income or property income subject to a bunch of exceptions. For an investor who focuses on property, the most common expenses for this process are charges for financing.
The income earned by using this part of your investment income is categorized as being income tax deductible. If you use your residence for business or rental uses as well making claims can affect both the claim as your primary residence and further expense against your rental property.
Accounting for Real Estate Professionals
The CRA examines the facts on the working relationship between taxpayer and property developers. Real estate agents in Toronto have to know whether they are employees or independent entrepreneurs which can alter their income records in some cases. Talk to us to discuss your facts so we can determine correctly whether you qualify as an employer or a self employed individual.
Finding deductions for Realtors and Real Estate Agents
Years of experience in the Toronto real estate market is required to optimize your returns. Whether you are a real estate agent or realtor, you will be faced with constant transit and traveling costs which will likely account for the majority of your expenses. Agents rely massively on advertising to generate new leads, business prospects and find tenants and an accounting firm can easily help you get most back from these costs.
As per EPA requirements a real estate course provides tax refunds which is beneficial to you. We can verify this by obtaining the correct information and filing when needed. Licensing & Professional Education are also allowed advertising costs. We have the expertise to optimize home offices expenses for agents to maximize their house sales write offs, auto expense can be categorized according to method detailed or simplified.
Accountants for a rental property and landlords
Landlords who own a single rental property or multiple real estate investments will definitely benefit from consulting with a real estate accountant to maximize their deductions. There are tons of deductions and tax write offs that can be used to lower your income tax.
This type of accurate tax planning is a well-known secret in the rental business that has been helping landlords with efficient cash flow and defer paying some tax by making new acquisitions or purchases. A rental business typically works with an accounting firm to properly use expenses, lower tax and save money.
Working with FinanTech
FinanTech offers strong Real Estate accounting services that include financial guidance and assistance during real estate transactions and the preparation stages which include financial documents and filing tax returns.
Whether you have one property or a thousand properties, FinanTech can manage challenges specific to your business. Whether your business is getting larger or owning a specific property you may need advice from a real estate accountant.
Get started today by setting up a one-on-one meeting with a FinanTech Chartered Accountant