The Best Ways to Invest in Real Estate

TYPES OF INVESTMENT

Invest in Real Estate

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.

Whether you’re a novice or a sophisticated and experienced investor, the real estate industry presents a golden opportunity to invest your money and grow that investment if one takes the time to research the many vehicles available.

We are big fans of investing in rental property.  Real  estate columnist Romana King remarked, “You can make money on rental purchases as long as you have a cash flow positive budget sheet. If you don’t and if there isn’t enough wiggle room in that budget then you’re buying a property that’s priced too high for you and you need to actually rethink your strategy. It’s still a good strategy but consider a lower price point. Even if you get lower rent all of those numbers have to make sense,” she added.

King advises people to save up a larger down payment and look for a multi-unit property to buy whether it’s a house that can be divided into two units or a triplex. That spreads your risk with more rental revenue.

She said REITs are incredible vehicles and they can be a great gateway into real estate investment.

“It does give you a better idea of how extraordinary real estate investments can be. They can be fantastic holdings. It also helps you diversify a little bit,” added King. “I really love REITs. I love REITs for anyone who really wants to get into real estate investing but doesn’t want to do the work. That’s not a negative. Not everyone has time to do all the investigation and crunch the math and make sure you have cash flow positive. If you don’t want to do that, and you want to get the upside of real estate investment, REITs are awesome. They’re excellent.”

REAL ESTATE FLIPPING

Understanding and controlling cost is really important when it comes to real estate flipping. The homework required here is to make sure you understand what exactly is selling in that neighbourhood, what the current trends are in that neighbourhood and whether or not what you propose fits in with those two current snapshots, and how much it will cost to renovate to realize your vision.

Timing is also important. It can make the difference in achieving a great return or losing on your investment.

We are familiar with the many different forms that real estate investment can take.   Give us a call to discuss your particular needs and situation, or just to help you understand investing in real estate!

If you are an investor in Real Estate check how we can help you.

Check our other blogs under Investment – that might give you answers about buying or selling a home.

The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.