Real estate is the most legitimate investment anyone can ever make. It has been everyone’s favorite investment collateral since the foundation of modern business.
Investment in real estate is favored by millions around the world regardless of their income group. Buying a home is worth every dollar and cent spent and invested. Since it is solid-state collateral, the equity it holds is something worth a lot.
One thing is understandable that not everyone can invest easily in real estate. In many markets, prices are beyond anyone’s reach while in some markets, the bubbles burst, and prices came crashing down. In the United States, real estate prices appreciated until 2008 when the recession forced prices down.
In Canada, the situation is different. While other markets remain stable, Vancouver and Toronto have been hotbeds for investment. Vancouver’s real estate was 5 times more expensive than that of Toronto. Now, Vancouver has cooled down and Toronto’s market is going up in terms of prices.
The Greater Toronto Area (GTA) in particular has seen real estate prices rising each day despite pricing controls. Stricter lending policies have been implemented to make sure no one defaults on home payments. More measures are being taken to ensure that real estate prices in Toronto are reduced and stabilized to make homeownership a reality.
A brief overview of real estate in Canada
Developing and selling real estate in Canada is itself a matter of the province’s jurisdiction. Each province and territory in the country has enacted laws & statures that regulate and govern the use, purchase, development, and ownership of the real estate.
A person who is not limited by any legal disability can acquire real estate in Canada. The same ruling is held for a Canadian who does not live in Canada. Foreigners are also allowed to acquire real estate in Canada the same way Canadian residents can.
In terms of foreigners owning a property (or properties in Canada), a federal legislation present provides both notification and review. This is provided through the Canadian Government in certain cases involving the purchase of real estate by foreigners in Canada.
What are the key investment tactics to make real estate investment count?
Every Torontonian understands the worth of the real estate. They also know the worth of such an investment move. However, many are unsure over how it works but, in all honesty, the process of investing in real estate is made of various investment strategies. Each one has its pros and cons.
Each investment strategy in real estate is a lucrative one, whether it is investing in Yorkville Condos for rent, purchasing a commercial property, sharing investments with a relative or a friend, or acquiring a property for the holiday; understanding the fundamentals of investing in real estate is necessary.
So, let’s have a look at the key strategies for starters to consider when investing in real estate:
1. Purchasing and holding a property for a specific period
One of the most common methods of investing in real estate; purchasing and holding is a long-term strategy for real estate ownership and creates good equity. Here an investor purchases a property (say a Toronto Condo unit) and rents it out for a specific period (which can be extended as per the owner’s wishes).
When the investment of this kind is done correctly, it thus process provides a lucrative monthly income. It also provides a top-class profit provided it is sold at the right time.
It should be understood that a lot of work is involved here as the owner of a rented property is a landlord. In that capacity, property owners must observe the residential tenancies act, maintain the property, grant their respective tenants access to all services (essential ones especially), and addressing tenants’ concerns in time.
Depending on how much time landlords must give, experts advise them to work with a property manager to ensure everything goes right.
The success of this strategy rests mostly on the buyer’s ability in finding and choosing a property that is in demand in a renowned location. An experienced local real estate agent with good knowledge of such areas can help them in this regard.
2. Purchasing a home
This is another common method of real estate investment. It is the dream of almost everyone around the world because everyone loves to have their own home. When a home is purchased and properly maintained, buyers make their equity and thus can secure their future. Paying off the mortgage is a big plus.
Whether they live in it or sell it for a profit; the choice is solely theirs.
How does it work? It is pretty simple. When buyers purchase a home after the closing process, their lender (mortgage provider) has their stake in it. The portion the buyer owns grows in equity each time they make a mortgage payment. When the process continues, the buyer keeps making their equity which becomes a valuable asset to be utilized as per their discretion.
Consequently, the home’s value will grow in time. Toronto’s real estate usually appreciates at around 5-6% annually. The result is a good profit when the buyer decides to sell the home they bought.
3. Doing a fix and flip strategy
This is often favored by enterprising real estate investors. Here, buyers purchase a property, renovate it completely, and then sell it for a good price bearing a good profit. This method involves a lot of labor and is suitable for those who love it.
The first step is searching for a property below the market value suiting all relevant requirements. This should be a place needing a lot more work than usual. If buyers need to avoid a full money pit, investors will hence need a budget for closing, renovation, and carrying expenses.
Once the property has been flipped, investors then find buyers and go through the complete selling process. Researching, business planning, coordination, and follow-ups are done as they are part of the fix and flip process.
If investors have no time constraints and are more than willing to do so, provided they have the budget for it; then they are looking at a potential opportunity for making a decent profit.
4. Investing in Real Estate Investment Trusts (REITs)
Compared to other methods of investment in real estate, Real Estate Investment Trusts (REITs) are units similar to shares that are usually traded on the open market. They are different because this method does not involve much physical or labor-related work. Here is how this method works.
Money invested by investors allows REITs to purchase a property (ranging from apartments, houses, housing tracts, complexes to retail buildings, and the like). Rents collected in them go towards expenses. Most of the income from these trusts is distributed towards investors.
This method helps investors avoid the hassles of a landlord’s duties and helps them enter the game of investment with reasonable capital. However, investors may not have the same access to leverage as they would when buying a physical property.
In most cases, investors receive a significant loan to purchase a property and renting it out for maximum returns as the property’s value rises.
Investing in real estate has potential benefits and are significant. If buyers are unsure of how to enter the investment game, they can always learn about real estate’s landscape with the help of an experienced, reliable, and knowledgeable agent. They can help buyers make such investment moves work for them.