November 2006 Volume 2, Number 11
In This Issue
· Income Trusts Explained
· Opportunity
·
The Need to Fail Faster
·
In Closing
Real Estate Links
Stef Lukas, our Realtor
Richard Anderson, our Mortgage Broker
The Real Estate Investment Network
An Online Listing Service
Another Online Listing Service
The Multiple Listing Service
Contact Us
Bill Biko
President/Investor Relations
403-870-4663
In This Issue
· Income Trusts Explained
· Opportunity
·
The Need to Fail Faster
·
Real Estate Links
Stef Lukas, our Realtor
Richard Anderson, our Mortgage Broker
The Real Estate Investment Network
An Online Listing Service
Another Online Listing Service
The Multiple Listing Service
Contact Us
Bill Biko
President/Investor Relations
403-870-4663
Income
Trusts Explained
- IMHO
In case you hadn't noticed, there has been a bit of an uproar over Income Trusts and the conversion of Corporations to Income Trusts. Here is a quick explanation of the issues. This is fairly simplified, so don't rake me over the coals for it. Also some of the observations at the end are mine and I would love to hear your thoughts.
An Income Trust is a trust company that is formed to hold income producing assets inside itself. This income is passed on a monthly or quarterly basis to all of the shareholders. The higher rates of return has made them quite popular with investors requiring cash flow.
The problem for the government is that Income Trusts are able to reduce their Corporate Income Tax and by redirecting their income to share holders, subsequently pay very little or zero income tax. This eliminates one level of taxation and by the government accounts, has taken about $500,000,000 out of their coffers.
With the recent announcements of Telus and BCE (Bell Canada Enterprises) to convert to Income Trusts, the government could have stood to lose over $1.1 billion in taxes. Of course once they converted, many other companies would soon follow.
This creates two dilemmas, firstly, many investors depend on these Income Trusts for cash flow and retirement. This prompts the second issue of where will the government make up the taxes if this continued. Special rules for seniors who depend on this cash flow are being put in place to help them, whether this ultimately protects them still remains to be seen. If the corporations cannot be taxed to make up the shortfall, you can bet the taxes will be pushed down to the citizens.
Income Trusts have become a tax loophole for corporations and, like all loopholes, as they become more popular, new laws are put in place to close them down. It shouldn't have come as a surprise to people that something was done to close the loophole, although it is surprising though how quickly it occurred and the method in which it was done.
This won't die down quickly, as it affects many powerful corporations and many wealthy individuals with influence, but my thoughts are it might just help keep our personal taxes lower. As a business owner, I am all for paying as little tax as possible; however, I also understand that you have to play within the rules. If the rules change, you just have to be ready to move on.
Opportunity
I've heard it said, "If you can't make money in Alberta right now, you can't make money anywhere". Opportunities simply abound here right now and the sky is the limit for the people willing to take some chances.
The Real Estate market in particular is one of those areas where there is tremendous opportunity, yet many people simply aren't willing to take some of those risks. Many people around Calgary who saw the boom and bust in the 80's and see the values rise over 40% in Calgary from last year, now believe we are at the top of a slippery slope.
Most of the arguments follow the same thought: the situation is exactly the same as what happened with the last Real Estate bubble in Alberta and they believe no one will ever be able to afford houses at these inflated prices. I cannot count how many times I have heard these stories. I used to get all wound up and try to explain to people how everything is entirely different now, how the government learned from the National Energy Program, and how people are still buying not only here in Calgary, but even in Vancouver where it is more expensive and they make less money. But now I just tend to smile and try to walk away or politely change topics.
There are many other like-minded people who see the opportunities out there and are willing to take some of these risks with us in order to receive some of the higher rewards available. If you too are like- minded about the opportunities available here in Alberta; send us an email, or give us a call and let's see if there are some opportunities we could work on together.
The Need to Fail Faster
I've been listening to some of the Robert Kiyosaki's audio tapes again (Robert Kiyosaki is the author of the Rich Dad, Poor Dad series) and it reminded me of how important it is to fail, in order to succeed. At first it appears to be a strange statement, but there is a more important meaning behind it. In the real world, we often learn much more important lessons that stick with us from our failures, rather than our successes.
In our world of Real Estate, failures can and do happen; we run into cost overruns, labour shortages, and other little "gotchas" that pop up. The important part is we learn something from each of these failures. Have any of you heard of someone who tried something, it didn't turn out well and now they profess it just doesn't work, or better yet, the people who are successful were simply lucky.
With every one of our failures, it brings us one step closer to another success. With more than fifty Real Estate transactions over the last three years and $7,000,000 worth of property changing hands, we have had many opportunities to fail and in turn, succeed from our failures. Through all of the countless hours, mistakes, successes, lessons learned, and continual improvements that we keep making to our systems and programs, all I can say is, "If we only could fail faster!"
I'm pretty excited about the changes with the Income Trusts, as this will open the window for more people to join us in Alberta Real Estate investments, where there are still opportunities for cash flow and good steady appreciation.
The Alberta boom still has a long ways to go, so watch for more foreign investors to continue to buy up property here so they can capitalize on the economics behind this boom. As always, there is still opportunity for people to join with us in Investment Opportunities, so if your income trust is drying up, your RRSP investments won't get you to retirement, or you just want to be more informed, call or email me and we can have more information sent out to you and give you another option.
Thanks to all those comments that are making it to us about the Newsletter and keep them coming, we love to hear the feedback!
Bill &
Karen Biko
Kat