Aside from current property prices and real estate values, investing in Canadian real estate investment has shown to be a sound investment for decades. However, many people struggle with how to invest in Canada real estate market. The first scenario that comes to mind when we think about investing in real estate is most likely owning our main property in the belief that its value would improve over time.
However, there are several more methods to invest in real estate today, including solutions for all budgets. Each option has a different amount of risk, and like with any investment, you should do your homework to ensure you’re investing your money properly. Here is a detailed guide on how to invest in Canada real estate market.
How To Invest In Canada Real Estate Market
Buy A House
The majority of Canadians are unknowingly real estate investors. Yes, when you purchase a house, you are not only purchasing four walls to live in, but you are also making a long-term investment known as equity. The difference between what you owe on your mortgage and the value of your property is referred to as equity. Your equity – your investment — grows as you make monthly mortgage payments.
Similarly, if the value of your property rises, whether because you picked a desirable location or remodeled it, your equity increases (the converse occurs if the value of your home falls). If you live in your home for most of the year, you’ll classify it as your “primary residence,” which might help you receive a capital gains tax exemption if you sell the property later.
House Hacking
Converting your home house into an income-producing real estate investment is perhaps the simplest method to own income property. There are numerous approaches you may take. One such method is house hacking. House hacking is renting out pieces of your principal dwelling, such as a bedroom or a basement suite while remaining in the house.
The money produced by the rental unit(s) contributes to the cost of your mortgage. It’s an excellent strategy to boost your cash flow and raise your net worth. House hacking may involve short-term rentals like Airbnb, but more later.
Flipping A Home
House flipping has become the most popular real estate investment method, thanks to HGTV. In terms of labor, it is also the most misunderstood and underappreciated. To flip a property, you begin by purchasing a home that desperately needs a facelift. The value of your property increases as you renovate it. After restoring the house to its former grandeur, you may sell it for a greater price than you paid, pocketing the difference.
In principle, home flipping seems to be a successful business. And it frequently is if you know what you’re doing. But here’s the catch: you have to know which buildings to purchase since not all abandoned and broken-down houses will immediately turn a profit. Home flippers generally seek properties with aesthetic flaws, which are considerably simpler (and less expensive) to correct than structural flaws. If you purchase a house with more damage than anticipated, you might lose a lot of money.
Rent Out Commercial Property
Commercial property is not the same as residential property. Instead of renting out homes for people to reside in, you’re renting out workspace. Malls, retail centers, industrial complexes, grocery shops, and offices are examples of commercial property.
Commercial property, like residential property, requires a significant initial investment—only larger. To even sit at the table of commercial investors, you’ll usually need more than a few million dollars (perhaps billions).
Make Your Primary Residence A Rental Property
If house hacking isn’t your thing, you could always purchase or rent a new house and transform your old one into a rental property. There are a few benefits to doing so. You save the cost of purchasing a rental property since you already own the house. Most lenders want a down payment of 25% or more on rental properties. In addition, you must select an appropriate residence and go through the mortgage approval procedure. It takes a lot of effort.
However, if you want to do so, be sure your current house is acceptable as a rental property. Is it possible to generate a positive cash flow? In other words, would the monthly rental revenue be sufficient to pay the mortgage, property taxes, and other associated costs?
Is it also in the right neighborhood? Is there a high demand for rental units in your area? Find out what the vacancy rates are and how likely it is that the house will always be occupied. A vacant rental home may rapidly become a problem.
Assignments Of Pre-Sale Condominiums
Are you looking for a low-risk approach to investing in real estate? Then you should look at pre-sale condo assignments. A pre-sale condo assignment occurs when you, the investor/buyer, transfer your rights to a finished condo to another buyer before the unit is finished. Because you sign up your rights to the new buyer, it’s termed an “assignment.”
Condo assignments are common in hot real estate cities such as Toronto and Vancouver, where property values rise faster than in the rest of Canada. Please keep in mind that condo developers may charge a 1% assignment fee for anyone interested.
In terms of indications, you should purchase a condo in an area where condo prices are likely to climb in the next few years. Doing your research on other upcoming projects planned in the region and consulting with a qualified, local realtor are your greatest sources for that.
Buy Vacation Property
Both residential and commercial property are long-term investments: as long as leases are followed, you will earn from renters and companies for a fixed price. However, vacation property may be a better option if you want to rent out property without having to deal with tenants and leases.
A vacation home is not the same as a hotel. It’s essentially a furnished home or apartment that can host visitors. Your vacation home does not have to be distinct from your primary residence. You may rent out a room in your house with the junction of technology and hospitality, making it simpler for people to obtain housing like Airbnb.
More ambitious real estate investors may seek vacation property in popular Canadian tourist sites such as Blue Mountain, Jasper National Park, and Niagara Falls, as well as in major tourist towns such as Quebec City, Vancouver, and Montreal. If you can manage your home’s upkeep and cleaning, you might earn a fortune from tourists.
Plus, if you want to vacation, you have a place to go. Who knows, it may wind up becoming your retirement home. You will bear the investment costs; you’re responsible for the maintenance, upkeep, and cleaning, not to mention the additional mortgage payments.
Airbnb
The growth of mobile technology has resulted in a flood of new real estate investors all around the world. By booking with Airbnb, travelers may now get unique, cheap rooms when they travel. If you own a home, an apartment with additional room, or a whole house, you may list it on Airbnb as a short-term rental property.
Advertise your property on the app, and Airbnb guests in your neighborhood will be able to reserve your extra bedroom, apartment, or house during their visit. This might be the most adaptable real estate investment available. You get to pick when your property is available and establish your rates. There’s no need to promote since Airbnb will do it for you via their worldwide network. Some folks commit whole houses to Airbnb rentals.
REITs
A REIT (“Real Estate Investment Trust”) is a business that owns and runs commercial assets such as offices, residences, hospitals, and retail malls. Shares of publicly listed REITs may be purchased in the same way that shares of any other publicly traded firm can. Although previous success is no guarantee of future results, you should invest in something with a steady stock price history and a regular dividend payout history.
If you are worried about exposing yourself to risk by purchasing too many shares of a single REIT, you may invest in an ETF that invests in various REIT assets. You may talk to your financial adviser about purchasing REIT shares or investing in REIT ETFs, or you can do it yourself by joining a low-cost online broker like Questrade.
If you’re new to trading equities and are intimidated by the prospect of picking REIT shares or REIT ETFs on your own, you may still invest in them by putting money into a robo-advisor. Some robo-advisers, such as Questwealth Portfolios, provide pre-built ETF portfolios that incorporate REIT ETFs.
Private Mortgage
You could take a different approach to real estate investing instead of purchasing property or investing in a REIT. You might be able to work as a private mortgage lender. As a private mortgage lender, you act as the bank. You lend money to homebuyers, charge interest on what they borrow, and gradually repay what you lent out.
Why would a homebuyer come to you for financing? They might not have much choice. They may have bad credit, or their income or job status may preclude them from obtaining a traditional mortgage. In any case, there is a demand for private mortgages. And if you have a lump sum earning a low-interest rate, lending it out as a private mortgage could help you earn more.
Frequently Asked Questions
Should You Invest In Real Estate?
Including real estate in your portfolio might be a wise decision. You may diversify your assets, take advantage of certain tax incentives, and build a steady source of income that will last until retirement. However, like with any investment, you should understand what you’re getting into. Real estate investment may result in massive profits. However, losses are also possible.
How Does Real Estate Investing Compare To Stock Investing?
Stocks and real estate aren’t opposed. In reality, they have significant parallels. Both may provide cash flow, passive income, and investment returns by increasing share prices or property values. They may help you hedge market risks since stocks can still perform well during a real estate crisis, and real estate property can perform well during a stock market disaster.
Can I Buy Property In Canada As A Non-Resident In 2022?
The Canadian real estate market is available to everyone beyond the country’s boundaries, including Canadian residents and non-citizens.
How Much Do Real Estate Investors Make In Canada?
The average real estate investing compensation in Canada is $70,200 per year or $36 per hour. Entry-level salaries begin at $60,000 per year, with the most experienced professionals earning up to $121,651 per year.
Is It Worth Investing In Real Estate?
Real estate is an excellent investment in general. It can provide continual passive income and be a smart long-term investment if its value rises over time.