What Kinds Of Returns Can European Real Estate Investors Expect
In the core markets of Europe, returns are expected to be positive but on the low side. You may not make 1015% a year, but you might have a cash return of a few percent a year. In reality, the focus of investors should be on cash, not on capital gains, because core residential markets are already expensive.
The commercial market is similar: either you buy in the established office and retail markets, and expect a cash return of around 46% with limited capital gains, or you buy in recovering markets. This might include southern and central Europe, perhaps Ireland and Central Europe, and the more regional cities in European countries. The returns could be higher though, but with much higher risks.
The euro is currently fairly stable, 1.19 against the pound and 0.89 against the dollar as of October 2021. European real estate is in extremely high demand, and its an interesting asset class. Still, investors should not overestimate their return expectations.
What To Look For When Investing In Real Estate For High Growth
The most successful real estate investors are those who are able to look at a city and determine which part is most likely to experience growth. On a larger scale, being able to identify favorable real estate investment trends has enormous advantages in terms of success and profit. These are the trends to look for:
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Job Opportunity
A healthy economy is an important foundation for a strong real estate market. This can be measured by looking at economic indicators such as GDP and employment data. So, it is 100% correct to say that when the economy is not doing well, neither is real estate.
The best markets to invest in real estate are those with positive job growth. As a result, people move to cities that offer employment opportunities. The rental property sector is one of the many winners of increased job growth. Many people are unable to take out loans to purchase their own homes. High demand for rental properties leads to more profit for rental property owners. Today, the national unemployment rate is 4.0%, down from 4.36% the previous year.
Related: Job Growth and Its Effects on the US Housing Market
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Population Growth
As a rule of thumb: the more people taking part in the economy, the greater the demand for housing. Trends in population growth are an excellent way to predict a real estate marketâs success.
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Construction Supply
Related: 10 Best Places to Invest in Real Estate in 2019
Real Estate Limited Partnerships
A real estate limited partnership is similar to a real estate investment group. It is an entity formed to buy and hold a portfolio of properties, or sometimes just one property. However, RELPs exist for a finite number of years.
An experienced property manager or real estate development firm serves as the general partner. Outside investors are then sought to provide financing for the real estate project, in exchange for a share of ownership as limited partners. The partners may receive periodic distributions from income generated by the RELPs properties, but the real payoff comes when the properties are soldwith luck, at a sizable profitand the RELP dissolves down the road.
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Future Real Estate Outlook
Monctons housing market saw continued price increases into the early months of 2022. In the first quarter, the benchmark price in Moncton rose 7.9%, crossing the half-a-million-dollar mark in March 2022 across all home types. A buyer can snag an average condo in the Moncton area for just over $400,000. Thats after prices skyrocketed 58% in 12 months, but its still $220,000 below the national average, making this a very affordable option for first-time buyers.
As the spring and summer real estate market gets into full swing, Monctons affordability will continue to make it an attractive destination for local and out-of-province buyers seeking the comforts of homeespecially with prices at historical highs in areas like Toronto and Vancouver.
View Zoocasa real estate listings in Greater Moncton.
Best Real Estate Investing In Canada Options
Many Canadians no longer consider real estate as only something they can live in. For the past few decades, Canadas real estate market has become a booming industry exhibiting immense returns.
Real estate investment is a fantastic way to create an income-generating source.
But many are also hesitant to invest in real estate in Canada. Its been called a real estate bubble by many sources for a very long time now.
You dont have to go all in and invest your entire life savings into real estate anymore. There are many different ways to get exposure to this asset class, and Ill go over the best real estate investing in Canada options below.
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How We Can Help
With a good balance of cash flows and appreciation, Toronto residential real estate makes an attractive long term investment.
In an economic downturn, history tells us that real estate drops less than other investments like stocks and bonds and rebound quickly. On top of this, residential real estate is a necessity. During a financial crisis, the government will make financial subsidies to help with necessities, making residential real estate investments more defensive compared to other types of investment properties.
Our team can help you through your real estate investing journey:
- Direct you to lenders who can get you the best mortgage terms
- Recommend the best properties based on your requirements and preferences
- Get your investment properties up and running,
- Help you grow your real estate investment portfolio
Buying Property Requires Money Upfront
If you plan on buying property, then youre going to need some money upfront. Even if youre mortgaging the property, most lenders require anywhere from 5% to 20% as a down payment. Your down payment amount will vary, depending on the type of property, your personal credit, collateral, and other factors.
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Mistakes Can Be Very Costly
Even the best researchers can make mistakes. Ive met investors who fail to account for important details, such as a poor building foundation, that cost them a lot of money on the back end to repair.
These mistakes can be very costly, cut into your profits, and may even result in you losing money. Meticulous research is the best way to hedge against this risk. If you dont know much about real estate, then youll definitely want to work with a reliable appraisal specialist.
How Do These Pre
You buy the condo based on blueprints provided by the developer. You look through the website, make an appointment, and then go in to look at the availabilities with that project.
These days theres a waiting list and its much easier to find out about an upcoming project. Im currently on a bunch of waiting lists for condo developments around Ontario.
I took a risk by buying into a printing factory in a developing part of Toronto . It was a pretty scary investment looking back. I truly believe that I was the right mix of delusional and optimistic about this.
Why did I think that a loft in an old printing factory would work? Why did I invest in an area that I knew nothing about?
I wish that I could tell you that I ran some detailed calculations. I was just more into taking risks back then. I also had it ingrained in my mind that you couldnt go wrong with real estate. I consulted with a family friend who shared his thoughts on why he loved real estate investing. I also figured that by the time the condo project was completed, I would have a full-time income coming in which would make it easy to get approved for the mortgage.
What are the pros of a pre-construction condo?
What are the cons of a pre-construction condo?
Then to make matters worse
I had two major issues with two different condo projects:
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Best Real Estate Investments In Toronto
Real estate is now a core part of Torontos prestige. The good news that any investor would want to hear from high housing prices, ever-rising home sales, more potential property buyers, you name it, has already been published about this city.
Real estate forecasts even take things to a whole new level. Toronto is now a real estate capital, promising more stable rates and super great returns in the coming years. Homeowners and investors have expressed more confidence in its potential. More people are migrating into the city, hoping to also enjoy all the good things it has to offer
Right now, there are a variety of investment options if you want to have a slice of the citys healthy real estate market. Each has its unique characteristics, benefits, and drawbacks. In this article, Ill be looking deeper into the five best real estate investments in Toronto that have great potential to grow your wealth.
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Affordable Canadian Housing Markets For Investors In 2022
You can still find winning properties, at least outside Ontario and B.C.
If youre a real estate investor, youve probably had worse years than 2021.
In addition to the national average house price increasing by 17.7%, the countrys rental market also began stabilizing during the second half of the year. Rental bidding wars were once again regular occurrences in Vancouver, Toronto and Montreal by the end of last summer.
Buying a new investment property in 2022 is a different matter. With prices in Canadas most attractive markets having escalated so rapidly last year, making a 20% down payment the minimum required for non-owner occupied investment properties is no longer feasible for many investors.
Kitchener-Waterloo, Ont., for example, saw its average price for detached homes pass $1 million in December, according to the Kitchener-Waterloo Association of Realtors. No longer able to choose from a robust selection of affordable single-family properties, investors in K-W are now battling each other for homes that require at least a $200,000 down payment.
The same dynamics are affecting other once-affordable markets Halifax, Hamilton, Charlottetown, Montreal, Nanaimo. Cost-conscious investors have no choice but to weigh affordable alternatives.
Here are four markets with intriguing fundamentals where homes cost well below the national average. They may not have been every investors first choice prior to 2022, but theyre all looking pretty sweet today.
What Is Real Estate
Real estate is the land along with any permanent improvements attached to the land, whether natural or man-madeincluding water, trees, minerals, buildings, homes, fences, and bridges. Real estate is a form of real property. It differs from personal property, which are things not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.
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How To Choose The Best Place To Invest In Real Estate
Now that weve talked about the top 10 cities, lets talk about how we chose these markets. More importantly, what should you consider when researching a real estate market? There are several considerations, but it mostly boils down to three things:
The neighborhood: As the saying goes: Location, location, location. How good is the local school district? Do residents have easy access to amenities and transportation? What is the local crime rate? Are there any nuisances, like amusement parks, that create a lot of noise? If youre not sure, it helps to work with a local real estate agent who knows the area.
The local population and market growth: If the local population isnt growing, you might have difficulty attracting renters. Before investing, look at market indicators, such as the local construction rate. The more new housing is being built, the more developers are betting on sustained local growth. Compare your target market to similar markets throughout the country, and see how fast its growing.
Wholesaling Real Estate: A Low Cost High Cash Flow Strategy
Wholesale investors are unique in the investment market in that they never actually own any real estate, but instead, act as middlemen who find good deals for other buyers. A wholesale investor finds a good property for sale, puts the property under a contract, and sells the contract to another buyer. Wholesalers can make anywhere from $500 to $5,000 per home. Wholesalers typically sell to house flippers because house flippers typically pay cash. Wholesaling is a low-cost strategy that has become quite popular in recent years, but successful wholesalers have to work in order to find both inventory and buyers. It also requires a certain amount of capital in order to market properties for sale.
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Rent Out Commercial Property
Commercial property is a little different than residential property. Instead of renting out places for people to live, youre renting out space where people will work. Commercial property includes malls, shopping centers, industrial complexes, grocery stores, and offices.
Similar to residential renting, commercial property requires a large upfront investmentjust more. Youll typically need more than a few million to even sit at the table of commercial investors.
Real Estate Market Is Unpredictable
Similar to the stock market, the real estate market isnt easy to predict. Many real estate investors make a deadly assumption and believe if the market is hot today, it must be hot tomorrow. But thats simply not true.
While real estate prices do tend to rise over time, the market could change drastically . Supply and demand, interest rates, and changing demographics all play a role in which way the market will swing. And, though you could buy property in a hot market today, nothing guarantees it will remain hot in the future.
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Principal Residence Property Investment
The first, and arguably, most important method for real estate investing in Canada is principal residence property investment. Purchasing a principal residence is a long-standing approach to investing in real estate.
When you buy a primary residence, you dont just buy a place to live in you are making a long-term investment.
When you own a principal residence, youre not helping your landlord pay their mortgage. You are paying off your own mortgage and growing your wealth. To purchase your own residence, you need to save up capital for a down payment.
Remember that when you purchase a residential property, its status as a principal residence is a crucial tool for you in terms of financial planning.
The Canada Revenue Agency allows you tax exemption from any profits you earn by selling a principal residence.
This exemption is crucial when it comes to real estate investing in Canada. All properties that you own are subject to tax when they increase in value. This value appreciation is called a capital gain, and any asset that grows in value is subject to capital gain tax.
When you sell a property, you are liable to pay capital gains tax on half the profit you earn from selling it. If you are selling a principal property, however, the CRA provides you with a complete exemption on all capital gains tax you would otherwise owe on the transaction.
Besides the principal residence status, there are several things you need to consider when you are investing in real estate.
Evaluate Cap Rates Nationwide
Of all the economic indicators, cap rates are one of the most important factors to consider when determining the best places to invest. Cap rates are the relationship between an investment propertys net operating income and the market value of the asset. Generally speaking, the higher a propertys cap rate, the better the rental returns.
As of mid-year 2016, metros with the best cap rates were Cleveland at 11.1 percent, Columbia, SC at 9.7 percent, Birmingham at 8.5 percent, and Pittsburgh and Milwaukee, both at 8.4 percent, according to HomeUnion® Research Services. Meanwhile, the coastal markets of San Francisco, San Jose and Orange County had the lowest cap rates between 2.4 percent and 3 percent.
In a nutshell, metros with reasonable or low monthly mortgage payments and stable rents typically make the best markets for returns.
These markets also outperformed the S& P 500 in 2015, and are likely to be a great hedge against the volatile stock market throughout the remainder of 2016.
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Income Tax Calculator: Estimate Your Taxes
These developments point to an increase in renting over the next years, and especially in lower-cost rentals like apartments. In some places single-family homes are cheap enough to be part of that rent level but in many markets you’ll have to split homes into rental units.
Every local market has a rent profile – how many people pay how much rent – and a “best” rent range where you find the largest concentration of renters. At this time of greater demand, investors should aim for rents in the “best” rent range, which will usually mean apartments or row houses.
While this guidance applies in any market, it’s even more important in markets where home prices have recently risen sharply you can’t just raise rents to match home prices.
24 Markets Where Home Prices Rose Dramatically
Local Market Monitor Inc.
The table “Big Price Increase” shows 24 markets where home prices rose dramatically in the past year, also the average home price, average monthly rent, and the ratio of home price to annual rent.
Quite aside from the strong possibility that some of these markets are in a price bubble that will burst in the next few years, the ‘home price/annual rent’ ratio points to the best way to invest in these markets.
Where the ratio is 22 or less, as in Las Vegas, Fort Worth, Camden and Atlanta, it’s possible – even with the recent jump in home prices – to buy a house and rent it out as is.
Local Market Monitor, Inc.
