TOP REASONS TO INVEST IN REAL ESTATE...
TONS OF PROPERTIES TO CHOOSE FROM !
Residential or Commercial, multifamily or single family, hotels
or offices? The choice is yours! There are plenty of options
out there, and doing some research will help you find the right
property for you. I always suggest investing in a property that
you are familiar with, it will help calm any of the nerves
typically associated with such a large investment.
VALUE APPRECIATION !
As communities grow, so too does the value of your property.
History has shown that real estate prices have continued to
steadily increase over the years. The longer you hold onto
your investment property, the more potential you have for a
LONG-TERM INVESTMENT !
Many people like the idea of an investment that can fund them
in their retirement. Rental housing is one sector that rarely
decreases in price, making it a good option for long-term
investments. Real estate will typically increase in value as time
goes on, compared to a savings account or an RRSP that will
lose value as inflation rises.
POSITIVE CASH-FLOW !
Many real estate investments offer positive monthly cash flow after your mortgage and other related expenses are paid.
This cash flow will increase over time as your mortgage
financing decreases incrementally and rental rates increase.
This will create a growing source of secured income for you.
DIVERSIFY YOUR PORTFOLIO !
As the cornerstone of a well-balanced investment portfolio,
diversification helps to offset volatility in any one particular
asset class and ultimately reduces your overall portfolio risk.
Investing in real estate is a powerful way for you to add a
valuable layer of diversification to your investment
HEDGE INFLATION !
The inflation hedging capability of real estate stems from the
positive relationship between GDP growth and the demand
for real estate. As economies grow and develop, added
pressure is put on rental properties and the real estate
marketplace. This causes rental prices and property values
to increase, which will ultimately increase your revenue.
LEVERAGE YOUR INVESTMENT !
Leverage simply means using borrowed capital to enhance
theearning potential of an investment, and when compared to
other investment classes, real estate delivers the greatest
opportunity to use the power of leverage. Since real estate is
a tangible asset, financing is generally more easily attained and
your potential returns are heightened considerably compared
to a non-leveraged investment
MAJOR TAX BENEFITS !
A number of tax deductions can be claimed on your return, such
as interest paid on the loan, repairs and maintenance, rates
and taxes, insurance, agent’s fees, travel to and from the
property to facilitate repairs, and buildings depreciation. Also,
when you own an income property, the interest on the mortgage
payments is also tax deductible. All this will help you save
money when it comes to pay that pesky tax man!
FAR MORE RELIABLE
While tradition investments such as stocks and bonds can provide
exceptional opportunities for wealth, the inherent risks are evident
with the market’s constant fluctuation. Real estate, on the other
hand, is far more consistent in terms of market volatility, it can
continue providing you steady returns even during lulls in the
economy- everyone needs a place to live.
OTHER PEOPLE'S MONEY !
One of the hallmarks of real estate investing is the ability to use
the rental income you earn each month to pay down your
mortgage financing. This benefit is unique to real estate
investing. Generally speaking, the rental income you earn will
be sufficient to cover your mortgage payments and the other
expenses associated with your investment unit, and still
provide you a positive cash-flow.
TYPES OF INVESTMENT PROPERTIES. THE BASICS.
DETERMINE YOUR OBJECTIVES
What is the purpose of your potential real estate investment?
- RENTAL INCOME
- SECOND/ VACATION PROPERTY
- LAND HOLDING/ VACANT LAND
CORE PROPERTY TYPES
When evaluating which style of property to invest in, it is a good rule of thumb to choose a type you are knowledgable about and comfortable with - do what you know. With that being said, the decision comes down to residential, commercial, or a combination of both. Listed below are a list of various investment property types;
Single Family Investment Property
Second/ Vacation Property
Multi-Family Investment Property
- small - 2 - 4 Units
- large - 5+ Units
Mixed Use - combination of commercial & residential eg; business with a tenant occupied apartment above.
Office/ Commercial Building - office space rentals. Units/Floors
Retail Investment Property
Industrial Property/ Space
ALTERNATIVE FORMS OF INVESTING...
REAL ESTATE INVESTMENT TRUST (REIT).
Real estate has been around since our cave-dwelling ancestors started chasing strangers out of their space, so it's not surprising that Wall Street has found a way to turn real estate into a publicly-traded instrument. A real estate investment trust (REIT) is created when a corporation (or trust) uses investors' money to purchase and operate income properties. REITs are bought and sold on the major exchanges, just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends, to keep its status as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed its profits and then have to decide whether or not to distribute its after-tax profits as dividends.
Much like regular dividend-paying stocks, REITs are a solid investment for stock market investors that want regular income. In comparison to the aforementioned types of real estate investment, REITs allow investors into non-residential investments such as malls, or office buildings, and are highly liquid, In other words, you won't need a realtor to help you cash out your investment.
REAL ESTATE INVESTMENT GROUPS.
Real estate investment groups are sort of like small mutual funds for rental properties. If you want to own a rental property, but don't want the hassle of being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all the units, taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.
There are several versions of investment groups, but in the standard version, the lease is in the investor's name and all of the units pool a portion of the rent to guard against occasional vacancies, meaning that you will receive enough to pay t he mortgage even if your unit is empty. The quality of an investment group depends entirely on the company offering it. In theory, it is a safe way to get into real estate investment, but groups are vulnerable to the same fees that haunt the mutual fund industry. Once again, research is the key.
REAL ESTATE LIMITED PARTNERSHIP (RELP).
For the less hands-on investor, a product growing in popularity is the real estate limited partnership or RELP, due to less volatility. A RELP is a private equity fund similar in concept to a real estate investment trust (REIT), which is publicly listed. In a RELP, however, investors pool their cash to either directly, or through a manager or management team, purchase and manage one or more real estate assets. Investors then receive regular distributions through the operation, lease or sale of the properties, subject to a management fee, and everybody goes home happy.
There are hundreds of closed-and open-ended RELPs on the market, and, as with most private equity products, there are endless variations in strategy, leverage, fee structure, and buyin and buy-out restrictions. They are also generally only accessible to accredited investors, those that have a certain level of assets and income and, presumably, the ability to handle risk.