Why Not a Canadian version of the 1031?


This story on canada.com is worth a read. Everyone should be talking to their MP about the necessity of changing how investment properties are taxed at the time of sale. I know from my own commercial real estate practice (this happened to me today!), that there are sellers out there sitting on millions of dollars in real estate that they can't 'afford' to sell because of the tax implications. Imagine owning a retail plaza worth about $15.5M and being unable to sell it because your accountant has advised you that you will be immediately liable for a $6M tax bill!

Let's do the math: for a building to be worth $15.5M, it should be earning about $1,300,000 per year in net income if we apply a capitalization rate of somewhere between 8% and 8.5%. If we take $15,500,000 and subtract $6,000,000 we're left with $9,500,000 (without considering brokerage fees, legal fees and closing costs). If we go back to marekt with that money and reinvest at similar rates of return, you'll soon realize that you just took a rather large haircut - to the tune of about $500,000 per year in income!.

So where is the incentive to sell and reinvest and thereby stimulate the economy?

Our government needs to take a long hard look at this because, in the long run, more money will be made from the spin-off of reinvestment, like renovations and remodelling, than will be lost in initial tax deferrals.


Green Office buildings becoming a reality

Developers see dollar signs behind green ratings

Big companies will pay a premium for eco-sensitive buildings, LORI MAYNE writes

globeandmail.com: Developers see dollar signs behind green ratings

This story in the Globe caught my attention as it's becoming more and more fashionable, and smart, to build green buildings. While these projects are only a drop in the bucket compared to the total amount of office construction going on right now across Canada, it is encouraging to see some of the biggest developers finally realize the returns that can be realized on green construction and systems implementation.

While it may cost more to build this way, the long term return on investment in terms of lower maintenance costs and lower energy costs will be felt for decades. Kudos to these visionaries.



Hi, I'm Doug Lytle, and I'm a sales representative in the Commercial Division at Century 21® United Realty Inc. I've been working in commercial real estate since early in 1997, and I started this blog as a way to communicate some of my ideas, tips and strategies about the business and the industry. Along the way, I've grown to enjoy commenting on current events as they relate to commercial real estate and real estate in general. I've worked with local companies just starting out, and with national retailers looking for new locations around central and eastern Ontario.

Together with my partner, Bill Pyle, we've been working in commercial real estate for over 35 years. We've both volunteered on many local committees for our Real Estate Association as well as various business and community organizations. We've developed a reputation as professional, ethical REALTORs with the expertise to work on projects as simple as small investment properties to complex land assemblies for national retailers. Please visit often and feel free to comment on anything you see here. We look forward to hearing from you! To reach me, please feel free to drop me a line by email.

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