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 an ideal way to park your capital to watch your investment grow. Its also a fantastic way to create an income-generating source.
To give you a perspective of how popular investing in real estate has become, here are some interesting stats:
Canadian investors and foreign buyers bought a record 551,000 residential properties in 2020.
Average price of homes sold across Canada in Dec 2020 was $607,280, up 17.1% from Dec 2019.
Many Canadians looking for ways to invest in real estate are hesitant. Its been called a real estate bubble for a very long time now.
Another reason for hesitation is that there is a lot of misinformation out there that can confuse people.
I will focus on preparing you for your endeavor in real estate investment in Canada. This article will be a guide that helps you understand ideal real estate investing options in Canada that you can leverage.
Popular Cities Outside Ontario For Investing In 2022
- Greater Moncton, New Brunswick. Located in southeastern NB, Moncton is one of the provinces three major urban centres. The city is the largest and fastest-growing in NB, drawing an increasing number of out-of-province migrants and newcomers to Canada each year, as buyers and renters seek better affordability, more space and less density. Moncton is also Canadas only officially bilingual city, making it a prime location for call centres and schools, including the French-speaking Université de Moncton. Monctons real estate market is hotter than it has ever been thanks to population growth, increased livability and an expanding economy.
- Montreal CMA, Quebec. The Montreal CMA is a great balance between big city vibes and major urban spaces, friendly neighborhood parks and charming city parks.
Youll find tons of green spaces everywhere as well as the possibility of quality outdoor entertainment that comes in many forms. When compared to other major Canadian cities, Montreal is much more affordable than areas such as Toronto or Vancouver.
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What Is The Best Type Of Real Estate Investment
The best type of real estate investment will depend on your individual circumstances, goals, market area, and preferred investing strategy. While many investors want a more straightforward answer, determining the best type of investment property is a subjective process. Choosing the right property type comes down to weighing each options pros and cons, though there are a few key factors investors should keep in mind as they seek the best choice.
When choosing the best type of investment property, the importance of location can not be understated. Investors operating in up-and-coming markets may find success with vacant land or new construction, while investors working in more mature markets may be interested in residential properties.
Aside from location, investors should also be aware of their own preferences when it comes to investing. Assess your preferred level of involvement, risk tolerance, and profitability as you decide which property type to invest in. Investors wishing to take on a more passive role may opt for buy and hold commercial or residential properties and employ a property manager. Those hoping to take on a more active role, on the other hand, may find developing vacant land or rehabbing residential homes to be more fulfilling.
Raw Land Investing & New Construction
Raw land investing and new construction represent two types of real estate investments that can diversify an investors portfolio. Raw land refers to any vacant land available for purchase and is most attractive in markets with high projected growth. New construction is not much different however, properties have already been built on the land. Investing in new construction is also popular in rapidly growing markets.
While many investors may be unfamiliar with raw land and new construction investing, these investment types can represent attractive profits for investors. Whether you are interested in developing a property from start to finish or profiting from a long-term buy and hold, raw land and new construction provide a unique opportunity to real estate investors.
Investors should be prepared to complete extensive market research to maximize profits when investing in raw land and new construction. This will ensure you choose a desirable area and prevent the investment from being hampered by market factors.
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Is Real Estate A Good Investment
The question of whether anything is a good investment for you should be answered with a conversation with your tax/financial professional. Everyone has a unique financial situation, and you should always get advice from a professional before you invest a single dime.
Next, its worth knowing that adding real estate assets to your portfolio offers a great way to diversify said assets. You might not earn as big as you could on the stock market or with startups, but it could still offset potential losses incurred elsewhere.
Most importantly, you need to do your research on the real estate market. Each real estate market is different New York is different from, say, Des Moines and returns in real estate differ based on location, asset type , and other factors. If youre buying a location, you have to pay for upkeep. If youre buying into a bundle of locations, there are numerous factors that could dictate the rise and fall of value of each location.
When doing research, be sure to pay close attention to real estate trends. Could climate change impact an area? Are consumers buying fewer houses or renting more? What are the averages of real estate-focused ETFs when compared to the S& P 500 or other types of investments? Most importantly, do the benefits of real estate investing outweigh the risks for your specific style of investing?
Think About Investing In Rental Properties
Tiffany Alexy didnt intend to become a real estate investor when she bought her first rental property at age 21. Then a college senior in Raleigh, North Carolina, she planned to attend grad school locally and figured buying would be better than renting.
House hacking allows you to live in your investment property while renting out rooms or units.
I went on Craigslist and found a four-bedroom, four-bathroom condo that was set up student-housing style. I bought it, lived in one bedroom and rented out the other three, Alexy says.
The setup covered all of her expenses and brought in an extra $100 per month in cash far from chump change for a grad student, and enough that Alexy caught the real estate bug. Now age 27, she has five rentals and is a broker and owner of Alexy Realty Group in Raleigh.
Alexy entered the market using a strategy sometimes called house hacking, a term coined by BiggerPockets, an online resource for real estate investors. It essentially means youre occupying your investment property, either by renting out rooms, as Alexy did, or by renting out units in a multi-unit building. David Meyer, vice president of growth and marketing at the site, says house hacking lets investors buy a property with up to four units and still qualify for a residential loan.
If you manage it yourself, youll learn a lot about the industry, and if you buy future properties youll go into it with more experience, says Meyer.
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How To Invest In Real Estate: A Complete Guide
Many investors have a real estate position in their portfolio. But adding other real estate investments can help you diversify your portfolio and protect you from stock market volatility. Lets take a look at your options for investing in real estate, the pros and cons, and how you can get started.
What Is A Real Estate Investor
With that all-inclusive definition of real estate in mind, we can now define a real estate investor as an individual investing in the real estate market by purchasing, leasing or otherwise acquiring rights to a piece of real estate or any of the rights inherent in a piece of real estate.
This is why we stated in the introduction that there are so many types of real estate investing. Investing in real estate often consists of those categories of investments that most people immediately think of when they hear the term such as owning residential or commercial properties and renting those properties out, or purchasing such properties to quickly improve and resell for a profit. But it can also refer to a myriad of other investment opportunities, including purchasing and then leasing the mineral rights to a parcel of land, or investing in a Real Estate Investment Trust. And today, real estate investing can even include participating directly in a large deal through a real estate crowdfunding platform.
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The Different Ways To Invest In Real Estate
There are many ways to invest in real estate including owning rental properties, investing in REITs, and through online platforms.
The key benefits of rental properties and online platforms is that your get to choose the asset, while in REITs – you normally need to take the good with the bad assets, and trust in the manager to deliver overall returns despite the many layers of fees.
How Tokenization Improves Efficiency Speed And Liquidity
There are several advantages by investing in tokenized real estate over physical property.
- Lower entry cost: Through fractionalization, the holder of security tokens can sell pieces of the tokenized property at a lower price than that of the physical property. This feature lowers the entry cost for smaller investors and allows the wealthier to seek out more opportunities.
- Improved ROI: Also, the buying and selling of tokenized property take place through standardized smart contracts. The automatic implementation of these contracts significantly lowers the transaction cost and the amount of time required to finalize the deal. These factors contribute to an improved return on investment.
- Simplicity: Lastly, tokenization brings simplicity in transactions. You can easily convert or liquidate the profit your property generates into cash and the technology automatically keeps a record of every transaction. This feature reduces the complexity of tracking the different transaction details and token prices.
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Consider Flipping Investment Properties
This is HGTV come to life: You invest in an underpriced home in need of a little love, renovate it as inexpensively as possible and then resell it for a profit. Called house flipping, the strategy is a wee bit harder than it looks on TV.
There is a bigger element of risk, because so much of the math behind flipping requires a very accurate estimate of how much repairs are going to cost, which is not an easy thing to do, says Meyer.
His suggestion: Find an experienced partner. Maybe you have capital or time to contribute, but you find a contractor who is good at estimating expenses or managing the project, he says.
The other risk of flipping is that the longer you hold the property, the less money you make because youre paying a mortgage without bringing in any income. You can lower that risk by living in the house as you fix it up. This works as long as most of the updates are cosmetic and you dont mind a little dust.
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Online Real Estate Platforms
Online real estate platforms, also called real estate crowdfunding platforms, help connect borrowers with investors. Developers will post deals and projects that they need financing for, and investors can then finance these projects through debt or equity. This creates a mutually beneficial arrangement investors can enjoy the benefits of real estate investing without having to deal with ownership or labor. The developers can get the financing they need for projects.
Keep in mind that financing real estate deals can be just as risky and speculative as directly investing in real estate yourself. Always do your homework before you strike a deal. Investors benefit from receiving monthly or quarterly distributions, and they can choose to invest in standalone projects or a portfolio of projects. Its also a great way to diversify your real estate investments geographically. Potential downsides to using a real estate platform are that the funds can be illiquid with lockup periods, and investors have to pay platform membership fees.
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Best Real Estate Crowdfunding Investment Platforms Of December 2021
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Real estate crowdfunding has transformed the real estate investing landscape. Once reserved for only the most affluent investors, many crowdfunding platforms have significantly lowered the barrier to entry for this type of alternative investment.
Low account minimums, simple fee structures and clean user interfaces make it easier than ever to include real estate in a well-diversified portfolio. Its important to note that some real estate crowdfunding platforms, including three of our picks below, are open only to accredited investors.
What’s the difference between these platforms and REITs?
Real estate investments trusts are companies that own real estate, like hotels, malls, shopping centers or rental properties. Publicly traded REITs can be purchased through a brokerage just like individual stocks or mutual funds.
What’s the difference between these platforms and REITs?
A Potential Source Of Income:
The earning potential for investment in CRE is much more. If you look at the figures, then the commercial property usually has an excellent annual return on the purchase price depending on the area.
Investment in CRE can garner robust predictable returns over the period by way of rents and high occupancies, ensuring a monthly to yearly incomes, thus adding stability to the investment portfolio.
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How To Get Started In Commercial Real Estate Investing
CREs are usually leased to tenants for operation of their businesses. CRE includes tenants of all kinds like space for offices, banks, malls, restaurants, and convenience stores or supermarkets. It has become an appealing investment option because of its coherent returns, pliable source of income, and growth prospects.
Though investing in CRE is attractive, there are some common hiccups, mistakes, and risks involved. Therefore, it is important to you know how to get started and what should you look out for before investing in CRE especially for the first timers.
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.
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Is Real Estate Crowdfunding A Safer Investment
No investment is guaranteed, and there are risks with all investing including Real Estate Crowdfunding. However, the more sophisticated crowdfunding platforms thoroughly review every real estate deal as well as the team behind it before making it available on their sites for investors.
Additionally, the real estate opportunities offered on crowdfunding platforms do offer the general comfort of investing in a physical piece of property, as opposed to a stock or bond or other nonphysical asset.
Real Estate Etfs And Mutual Funds
Investing in funds is an indirect way to invest in real estate. You actually own shares of the ETF or mutual fund, but you do not have direct ownership of the real estate itself. The funds invest in the shares of companies that are in the real estate business.
Why invest in real estate using ETFs and Mutual Funds?
The funds invest in the stock of builders and developers, building material suppliers, or even in REITs. They have the advantage of the highly liquid, and are perfect for investment portfolios of all types, including retirement plans.
The downside of real estate ETFs and mutual funds which is true of nearly all real estate related investments is that they run with real estate cycles. When the real estate market is doing very well, they can be incredibly profitable. But when real estate is in one of its bust cycles, they can be one of the worst investments possible.
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The Bottom Line: Research Before Choosing An Investment Strategy
Learning how to start investing in real estate doesn’t have to be complicated. However, it’s important to take a look at two main things before you invest:
- Check your finances: Look at your financial situation to ensure that you have little debt. Debt will hamper your ability to get the best interest rates and may put you in a financial bind if, for example, you don’t have a renter for your property for a few months in a row.
- Research, research, research: Do your research before closing on deal. You want to make the right decisions for the right reasons, financially.
Ready to pursue investing in real estate? Get a mortgage preapproval to begin your real estate investing journey.