HOW TO INVEST IN REAL ESTATE
The Canadian real estate market continues to grow, fueled by the lack of supply and immigration trends. As the stock market continues to fluctuate, Canadian real estate is so much more than a place to live, it has become a sought-after asset class to invest in. You might ask yourself – how can I get in on this market? Good news, there are several different ways to invest in real estate.
Invest in rental property – This could be a condo you buy and rent out or commercial property with tenants. Being an active investor has its advantages, as you are managing the property yourself, you are not paying fees and any gains are solely yours. There are risks to consider. You’ve got to have the income to carry the mortgage and the space in your bank account to handle any sudden emergency repairs or missed cheques from tenants.
Real Estate Investment Trust (REIT’s) – REIT’s are the lowest-maintenance, most accessible real estate assets. A REIT is a company that owns, and in most cases, operates income-producing real estate. This could range from condos to office buildings to retail plazas. Investing in a REIT creates access to a diverse range of properties, all with cash flow, and you’re not on the hook if the value of the properties suddenly drops.
Limited Partnerships (LPs) – If you have more money to play with, this could be the right option for you. LPs allow you to invest in an individual project of your choice, say a high-rise condo development or a single-family community. There’s no ongoing cash flow, but you can share in the remaining profits once the mortgage(s) are paid off.
Mortgage Investment Funds – In certain circumstances traditional bank financing does not cover certain real-estate loans. This is the niche market where a mortgage investment fund lends money (secured against real estate) to borrowers. The cost of capital is higher than conventional mortgages. An investment into a mortgage fund often allows you to invest for shorter terms than an LP and pay out monthly returns. The funds also typically allow for investments through your registered savings accounts.
Before making any investment, understand the risks and make sure you’re willing to take them. Once you take the plunge, some of the record growth in Canadian real estate over the last 2 decades can be yours. To learn more about how you can start balancing your portfolio through investing in a mortgage fund, speak to one of our Exempt Market Dealers.