Stop using your TFSA
Many real estate agents prefer using real estate for their retirement planning rather than an RRSP. It makes sense because you know the landscape and understand the risks.
You know what areas in Ontario are easier to rent.
You know what types of properties are easier to rent.
You know what house values you need for the numbers to make sense.
And if a purchase doesn’t work out, you know that holding onto a property for 2+ years pretty much guarantees that you’ll be able to make a profit on selling it anyway.
So the question that needs to be answered is HOW do I save for my next investment property. And the answer is – anything but your Tax-Free Savings Account.
Put the money you are saving in a separate bank account to protect the capital.
Put the money in a high-interest savings account to earn a little bit of growth.
Put it into a non-registered investment to grow with the market if you have the time to do that.
But stop using your TFSA for temporary savings.
Your TFSA will provide you with the best returns when it is paired with long-term strategies. If you want to transfer properties to your children as an inheritance, you can use your TFSA to cover the taxes. If you want to take the family on a more expensive vacation than what your rental income can cover, you can use your TFSA to pay for it. If the rental market drops out in the future, like this year, you can use it as a tax-free supplement to your retirement income.
Your TFSA is meant for long-term strategies and should be set up like that.
This also begs the question – is yours currently setup like that? Did your advisor open up a TFSA investment account for you so you can grow your money, or did they open a TFSA bank account?
If it’s the latter, it might be time to start working with someone looking out for your financial future.