Good, seems like you have done your homework well. :-)
I do not see any major risk in this investment. Was just highlighting if you have capacity to do investment in detached properties, those make more sense in long run. With option of second apartment, there is always a possibility of positive cash flow.

Either way You are set to gain from this investment if you keep it for long term. all the best.

Thanks Everyone.

I have made decision and bought new property from the builder (closing in May 2017). I still have 2 more days to cancel or make any changes.

I purchased with $35K cash discount + $25K design center bonus + A/C + Hardwood on Main floor. This was quick decision on base of the deal I was getting.

Currently builder is selling same model for $10K cash discount + $15K design center bonus + A/C + Hardwood on main floor. They denied my friend to give the same deal what I got.

I was watching market from long time and I am happy with getting this deal.

I have few questions.

This is my second rental property. One is in partnership with my friend. Going really well from last many years. This one is on my wife's and my name.

1) Builder is ok to declare or not as an investment property. If I declare investment property, I have to pay about $20K more to builder (full HST). I can apply GST/HST rebate to government and get refund those $20K. Process will take few months after closing date. If I don't declare as an investment property, I can pay $20K less to builder and builder will get GST/HST rebate.

I am thinking to declare as an investment property because of following reason.
I can get mortgage for $16K more ($4K will be down payment - 20%). When rebate of $20K come, I can use those money for investing somewhere else.

Not sure there will be any advantage or disadvantage related to capital gain tax at the time of selling home. Anyone can through some lights?

How easy to apply for GST/HST rebate? What are conditions to get refund?

What are other advantages/disadvantages to declare investment property vs not declaring?

2) Should I buy this property on my wife and my name? OR Should I create trust/incorporation? (Expecting +ve cash flow as per my previous experience)

How does trust works and do you think there will be any advantages in compare of having on our name? (My wife is in lowest income tax bracket)

3) Any other advice/suggestions will be appreciated. I am lack of knowledge related tax from incorporation and trust point of view though I will say I have good knowledge on individual tax return.

Quick response will be appreciated. It might help me to make any changes in deal. I am also going to talk to lawyer. Your response will help me to discuss many things with lawyer.

Thank you very much in advance.

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Success is Never Ending and Failure is Never Final.

There are a few books published with regards to investment in Homes and also having Trusts. Since it is a long and drawn out subject matter and needs good grasp of it prior to entering into it and also get to know some one who can do the explaining from the Financial Advocacy Group, I did not continue reading on it. But it is a topic worthy of discussion on this board and seek some opinion on it.

How come you are going about it in a round about fashion? Did you get introduced into this without having a good idea in rental investing OR this purchase is for your personal occupation and the current one will get into rental?

If it is the latter, then, everything will fall in place, which is your NEW purchase in 2017 will be your Residential home and the current(OLD) home will get into rental and there by becomes an investment and not a personal residence.

It is just my personal opinion, and that by taking over the possession as an owner who will occupy it yourself, you will derive the GST/HST Rebate that will offset the costs also. That will be an additional incentive and profit to you both.

Only a Financial Planner can advice you about the switching of the titles to the low income owner issues associated with it. Plus the avenue of forming a trust. (You cannot do that over night, it takes time for the lawyer to do its formation. Also there are no shell companies made available to you overnight here in Canada as it is not much of a Tax Haven!)

Please don't consider this as advice as this transaction involves a very large amount and your life time savings and it might throw your retirement plans etc., off the kilt and jeopardise everything that you have planned all along.

Not having sufficient time on hand to discuss this with some one in High Finance, I am only hoping that things could be some how accommodated at a later date and corrections could be made, as opposed to what you MUST do within the next two days. Good Friday intervening in between, you should try and accomplish the same as soon as you can. If possible this evening with a good discussion with a Bank that you deal with for all your financial needs.

Hope this helps you a little. Good Luck.


FH.

Edit:
P.S. A good Accountant, if you know or using one, will tell you how he can pin point a value for the current residence on the date of moving and how he can work in all of the expenses that you incurred in its purchase etc., and the fixing up of the same later to bring it up in value etc., if you can meet with him and work some thing out by this evening, that should provide you with a little bit of peace for starters. fh

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Quote:

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Originally posted by meitsme

Thanks Everyone.

I have made decision and bought new property from the builder (closing in May 2017). I still have 2 more days to cancel or make any changes.

I purchased with $35K cash discount + $25K design center bonus + A/C + Hardwood on Main floor. This was quick decision on base of the deal I was getting.

Currently builder is selling same model for $10K cash discount + $15K design center bonus + A/C + Hardwood on main floor. They denied my friend to give the same deal what I got.

I was watching market from long time and I am happy with getting this deal.

I have few questions.

This is my second rental property. One is in partnership with my friend. Going really well from last many years. This one is on my wife's and my name.

1) Builder is ok to declare or not as an investment property. If I declare investment property, I have to pay about $20K more to builder (full HST). I can apply GST/HST rebate to government and get refund those $20K. Process will take few months after closing date. If I don't declare as an investment property, I can pay $20K less to builder and builder will get GST/HST rebate.

I am thinking to declare as an investment property because of following reason.
I can get mortgage for $16K more ($4K will be down payment - 20%). When rebate of $20K come, I can use those money for investing somewhere else.

Not sure there will be any advantage or disadvantage related to capital gain tax at the time of selling home. Anyone can through some lights?

How easy to apply for GST/HST rebate? What are conditions to get refund?

What are other advantages/disadvantages to declare investment property vs not declaring?

2) Should I buy this property on my wife and my name? OR Should I create trust/incorporation? (Expecting +ve cash flow as per my previous experience)

How does trust works and do you think there will be any advantages in compare of having on our name? (My wife is in lowest income tax bracket)

3) Any other advice/suggestions will be appreciated. I am lack of knowledge related tax from incorporation and trust point of view though I will say I have good knowledge on individual tax return.

Quick response will be appreciated. It might help me to make any changes in deal. I am also going to talk to lawyer. Your response will help me to discuss many things with lawyer.

Thank you very much in advance.

---

Fido, thanks for detail reply.

Please note that New property will be rental property. I am not moving. That is why I am talking about declaring investment property and GST/HST rebate.

I have no plan to cancel the deal. I am sure this one will be profitable deal on calculated risk.

May be the way I am investing is not the optimize way to save tax and that is what I am trying to figure out. It will help me in future if not on this property.

OR May be this is an optimize way to save tax as my wife is on lowest tax bracket. (Not sure though...)

The one negative point I know is the liability of not having incorporation/trust.

I would like to get more information and trying to figure out optimize way to invest in real estate.

I am going to get professional advice too.

Thanks.

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Success is Never Ending and Failure is Never Final.

I am sure you meant FH .... He is the top one who replies in very detail ...

Thanks FH.

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Fido.

Yes. I mean FH. My mistake.

Thanks.

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Success is Never Ending and Failure is Never Final.

As per my understanding - the builders price is usually nett of HST rebate. So if you are ineligible for rebate, you need to notify the builder in advance and he will add the HST on the agreed upon price.

If you do not declare in advance, the builder will get the HST rebate and you might get the notice in mail about the ineligibility and demand notice for recovery with interest/fine.

If you are planning to buy this as investment/rental property, you have to disclose to vendor and he must collect HST from you. You can later claim the rebate as applicable directly.

Hiren