Investing on a rental property is a great way to earn and building wealth in business of real estate. It is a fixed income every month. Unknown to most, a rental property has several tax advantages.

-Tax deductions on rental property are in line with any business tax. Expenses for property maintenance are deductible. These expenses could include cleaning, landscaping and insurance.

-Your mortgage payments on your rental property are also tax deductible. The equity you put into the insurance grows tax-free.

-If your investment appreciates over the years, a tax-related benefit is that the appreciation is tax-free. If you buy a home in an amount of one-hundred thousand dollars and it appreciates to two-hundred thousand, the one-hundred thousand you enjoy is currently untaxed. The combination of appreciation and borrowing is also non-taxed. For example, if you purchase a property for one-hundred thousand dollars and it doubles, if you borrow two-hundred thousand against the property value, the amount you borrowed will not be taxed.

-Another tax benefit you could enjoy is the deductible expenses incurred in the course of your business. If your business is mostly on investing on real estate, you can be considered a real estate professional. The benefit you can get out of this is whatever real estate activities you do such as having a property rented will be considered as an active business rather than a passive one, meaning you can deduct any operating expenses from your tax.

-A government incentive called the phantom cash further benefits people in real estate. In it, the value of your building is divided by 27.5 years. You can then divide this amount from your annual tax due.

To explain this, here is an example:

A property bought at $40,000 divided by 27.5 = $1,455. You can deduct this amount from your taxable annual income. This excludes other deductions from your rental income.

- Tax Deferred Form 1031 allows you to sell your property with the intent of buying a higher priced one and not having to pay any capital gains tax. Form 1031 form allows a third party to hold your money until you invest it into another property of higher value. This allows you to upgrade your rental properties without having to pay taxes.

-In case of accumulated rental losses, these will enable you to boost your finances. If your losses have gone up to thousands, be sure to claim every single penny of tax deductions you are entitled. Take note that for every $1,000 expenses claim can give you $400 off your tax bill later on.

Go to your mortgage lender and let them know of your desire to bank with them. There are certain tips to ensure that they don’t turn down your application. Now that you have decided to opt for a mortgage loan make a check list of things that you need before going to the bank. You would most definitely be asked for a property appraisal document, your income details, assets and liabilities among others.

Getting pre-approved for the amount you can afford is always a good idea. You don’t want to be turned down if you can avoid it.. Get pre-approved i.e. make sure your papers of credit, income, assets and liabilities are verified and that you are eligible for the loan. Find out enough about the rates, schemes and offers that the different lenders have. Think about the term of the loan – if you want to sell off the property in a few years then a balloon rate or an adjustable rate mortgage maybe a better option; a fixed loan maybe your safer bet for a longer duration. Compare the different schemes and speak with a formidable loan officer to help in your decision. There are mortgage plans that suit each one of you, according to mortgage brokers and mortgage lenders in the Canadian market.

Going with your mortgage broker will improve your chances of a loan. Always check the credentials of your mortgage broker. Stay away from brokers who seem to be promising you things things that seem to good to be true as they probably are. Your mortgage broker should be helping you every step of the way. You may be asked for additional documents. It is nicer to have just one loan to pay off at any point of time – when you apply for a mortgage loan, don’t have any other major loans pending.

If you receive money from your friends, relatives it is better to inform the bank. Further, with some wise spending and personal finance allocation on your part, you can even close the loan faster. However, remember that you could be charged a special fee if the debt is paid off in such a manner. Mortgage insurance could protect your lender in case you default. Also don’t be late in your monthly payment; this could incur a penalty.