If you need assistance, please call 705-238-6001

The Best Ways to Invest in Real Estate

Thursday, November 12, 2020   /   by Earl Gaddi

The Best Ways to Invest in Real Estate

When it comes to investing in real estate, most people look to own their primary residence with hope and trust that the value of the property will increase with time as they create equity in their investment. 
It's a sound and reasonably secure way to raise your investment if you keep a long-term eye on it. But for many novices they are probably not aware that increasing investment in real estate will take many other forms—everything from renting a property or a holiday home to purchasing a home, restoring it, and selling it at a higher price to investing in a Real Estate Investment Trust (REIT). 
As with every investment, each strategy carries different risks – so you want to explore your options carefully to ensure that you invest 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.
A middle-aged couple looking at financial statements in a modern dining room
“Another key point is you hear people talk about the stock market and mutual funds and RRSPs as go-to things. And sure there’s returns there and yields. But you can’t live in a mutual fund. So not only are you getting appreciation and a tremendous return on your initial investment but it’s actually serving two purposes-it’s a secure investment and its housing.

“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 that many people were buying properties to rent out. In this respect, the value of the property can be valued over time, but you still produce revenue. 
One of the main factors to consider when purchasing rental properties is the financial costs, including the payment of mortgages and the payment of taxes on utilities. And of course, whether you employ someone to take care of the house, you have a duty as a landlord that you may have to deal with personally. 
Romana King, a personal finance columnist and real estate expert, said it's reasonably easy to make money using real estate as an investment asset, whether it's speculation buying and flipping home or spending sweat-equity and flipping.

“Simple in that you don’t require a lot of specialized knowledge so you don’t have to go to school for anything. You don’t need a qualification. But with that said it’s not easy in that you do still have to treat it like a business so you really need to be aware of the numbers involved,” she said.

That's very important when it comes to flipping real estate. The research you need here is to make sure you understand precisely what's going on in that community, what's going on in that neighbourhood and whether or not what you're suggesting matches in with those two snapshots. 
Timing is critical, too. It can make a difference between making a big return or losing your investment. 
King said she's a huge fan of investing in a rental house. 

“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 suggests that people save a bigger down payment and look for a multi-unit property to purchase whether it's a house that can be split into two units or a triplex. That spreads your risk with more rental income. 
She said that REITs are amazing vehicles, and they can be a great gateway to 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 a 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.”

If you're a beginner or a savvy and seasoned investor, the real estate industry is a golden opportunity to invest your capital and maximise your investment if you take the time to explore the many available vehicles.

The article above is for information purposes and is not legal or financial advice or a substitute for legal counsel.