TYPES OF INVESTMENT
When it comes to investing in real estate, most people are aware of how beneficial it is to own their principal residence. Over the past 100 years, the rise in home ownership has been breathtaking – and your capital gains in your principal residence are tax free!
However, many novices are likely unaware that investing in real estate can take many other forms-everything from purchasing rental property (including apartment buildings!), a vacation home, buying a home and fixing it up to “flip” it at a profit or investing in a Real Estate Investment Trust (REIT). Each approach carries with it different risks–so you’ll want to thoroughly research your options to ensure you’re investing your money responsibly and strategically.
“Realizing the dream of homeownership has proven over the years, decades and decades, to be one of the best investments available to Canadians. If you look historically and you had X number of dollars to put in a downpayment . . . what you put down and what you paid, your investment has outperformed most other vehicles that are available to Canadians,” said Costa Poulopoulos, Chair of the Canadian Real Estate Association, adding people are paying down their mortgage while the property value rises so they’re winning on both ways.
“There are many vehicles available for investing from the novice first time trying to figure out a secondary home and starting small to sophisticated investors, conglomerates, REITs, whatever the case may be.”
For example, Poulopoulos said many people buy properties to rent out. People who bought rental property a few years ago have benefited from both a steady stream of rental income AND spectacular rises in the value of their property!
One of the key things to consider when buying rental properties is the financial costs including mortgage payment and paying for utilities to taxes. And of course, unless you’re hiring someone to take care of the property you do have responsibilities as a landlord you might personally have to handle.