How Can I Invest in the Canadian Real Estate Market?
There are numerous investment strategies that someone who is looking to invest in the real estate market can use. Prior to sinking funds into any kind of real estate investment, it is important that you take into account the macro-economics of whatever province you are looking at. The best locations to purchase investment properties will be those with a growing GDP, high population growth, high rental rates, and those with large projects and developments underway. Try to aim for areas that have high home purchase rates and low rental vacancy rates. If after researching these factors, you think you have found a profitable location then the following information will help you to reach all of your real estate investing goals.
Rent to Own
Let’s face it getting a mortgage can be tough. However, it doesn’t mean that you cannot be a real estate investor. The reality of investing in real estate is that any credit issues or an inability to come up with the necessary minimum deposit can make getting approval for conventional financing challenging. However, When this happens, many people turn to a different kind of real estate investing – rent to own (RTO).
With rent to own, an investor can buy a property. They will then set a rental lease up with someone who intends to pay rent the house in the short term and buy the house in the long term. In addition to the traditional rental lease, there is also an RTO agreement in place, outlining all the particular details of the rent to own process between the investor and the RTO tenant-buyer. Rent to own generally works like this: The person who is planning on eventually buying the property (tenant/buyer) generally pays a deposit to the investor, as with most rental agreements this is due prior to move in. After then often there is an extra monthly deposit that is due on a monthly basis. This monthly deposit gets applied to the tenant/buyers down payment for the property. This date is pre-determined, as is the price of the down payment. Generally, rent to own terms is about 2-3 years.
Flip the Property
One of the most popular investment strategies is to flip a property that you have purchased. This simply means purchasing a property for what is considered below the market rate for the area and then renovating it to bring it’s market value up and then selling it for a higher profit.
Another option is to purchase the property, renovate it, and then hold on to it for a while until the market improves. This is called the hybrid approach. One potential benefit to this approach is to refinance once the renovations are complete. Doing this might allow you to pull out whatever capital you initially put into the investment, therefore reducing the amount of your money that is invested in the property. This can be a great way to build a real estate investment portfolio quickly.
Buying and Holding the Property
Another way that people can invest in the real estate market is to do what is often referred to as a “buy and hold”. This means that the investor buys the property and rents it out for enough to cover the mortgage, expenses and generate positive cashflow. This is a great option as it allows for someone else to paydown the mortgage and leaves the investor with paid for house in the long run.
Investing in real estate can be a lucrative and fun career, however, it does come with a great deal of risk. As with any investment it is crucial that you do your research and have some money set aside for when problems inevitably do arise. Remember, you might begin thinking about investing one way, and end up investing in another. There are several avenues to real estate investing, none of which is better than the other. Good luck!