How to Invest in Real Estate to Make Money

Investing money in real estate can get immediate returns and facilitate long-term returns. Real estate investment can often get income streaming in the form of rents, or you can gain property appreciation when you look out to sell it. Gauging the trends of the real estate market, you can find the investment that is lucrative for you.

Investing in real estate will also enable you to add variety to your portfolio. You will now have a real estate property with stocks and bonds in investment. But you might think about how an average individual can invest in real estate that requires much time, effort, and money. Don’t worry; keep going ahead to discover more about making money in the real estate market.

What Are the Different Ways to Invest in Real Estate?

What Are the Different Ways to Invest in Real Estate

Real estate investing can be done in different ways to facilitate the investment by an average person who may or may not have the funds to invest in a property. Let us check out some of the ways to invest in real estate:

  • Invest In Rental Real Estate

Invest In Rental Real Estate

Invest in real estate market that will bring you rental income. These days there is a huge market for rental properties online. You can go on any deemed website and find many properties in a specific area listed for rentals. If you want less commitment to the process, then you can use sites like Airbnb, where you can list your property for rental, and everything else will be taken care of by their online portal.

Depending on the nature of possession, the rentals can be divided into majorly 3 categories. Based on the nature of occupancy, here are some types of real estate investment in rentals:

    • Vacation Rentals : As opposed to staying in hotels, vacation rentals are when you can use a rental space for a limited number of stays in a particular place.
    • Long-Term Rentals : If someone is interested in renting a place with privacy for a longer time, then such rental options are available via online portals.
    • Commercial Property Rentals : Workspaces are now being shared, and the commercial property rental concept has been modernised; therefore, you should research a suitable property.

Risks and Rewards of Rental Property

Understanding buying rental property in Canada also include their pros and cons. There are many benefits to investing that could bring you returns, but you should also consider the cons and try to have a contingency plan for as many of them as possible. 

Some of the benefits of having rental property include the following:

    • You can gain tax benefits
    • You can keep it flexible for your usage
    • You can sell this property with capital gains
    • If you have extra space in your home, it is the best rental option
    • It will help to save property taxes
    • It can be one source of passive income for you

Some of the drawbacks of having a rental property are:

    • Rising premium rates
    • Non-liquid nature
    • Changes in the regulations
    • Difficult tenants
    • Maintenance 
    • Costly repair
    • Lengthy vacancies
    • Documenting restrictions
  • Invest Through REITs

Invest Through REITs

How to invest in REITs, or Real Estate Investment Trusts will allow you to buy a property without committing to the huge amounts of money that go into buying it. It saves time, effort, and money on the investment. They are like mutual funds for real estate. Buying property with REITs is like investing in a real estate venture. The investors purchase the shares of REITs and get returns on their investments.

Types of Canadian REITs Properties

There are various REIT properties in Canada for you to choose from. With your primary objective being to get a return on investment, here is a list of some of the best and most well-reputed REIT properties in Canada:

    • Smart Centres REIT : Ontario-based REIT specialising in retail property. All the malls with retail rentals fall under the categorisation of Small Centres REIT.
    • H&R REIT : Canada’s 3rd largest REIT specialising in commercial real estate market. It focuses on commercial real estate in Canada.
    • Riocan REIT : Canada’s 2nd largest REIT specialising in supermarkets and neighbourhood convenience shopping centres.
    • Artis REIT : Canada’s largest diversified REIT offering a variety in its portfolio. Their main aim is to give their holders a stable return.
    • Granite REIT : Specializes in multi-residential apartment buying. It also focuses on the development of warehouse and industrial properties. 

Best Canadian REITs Comparison

Some Canadian REITs are better than others at getting quick returns on your investment. Certain REITs focus on having a diverse portfolio and, therefore, bet on giving their investors consistent growth and stable returns. The REITs we discuss here are some of the best with varied portfolios and are prominent to look into for investing. Let us check out the top Canadian REITs by comparison:

H&R REIT

    • With a payout ratio of 11.8%, this REIT is considered the best of the investment options. To make real estate money, you must not miss out on investing in this company. They have a diversified portfolio and facilitate buying property investment in retail, office, industry, and residence.

Canadian Net REIT

    • They are smaller in market capitalisation than H&R and offer a payout ratio of 29.45%. They focus on high-end commercial real estate. They have their focus on smaller properties by comparison.

Retail REITs

    • Plaza Retail REITs are in the retail category and get their operating income from strip malls and enclosed retailers. They have a history of paying excellent yields to their customers in the form of dividends.
  • House Flipping

House flipping is when people buy homes, refurbish them, and then sell them. This is one of the most cost-enhancing ways of investing in real estate. It also consumes a lot of time, but it is also an efficient way of gaining investment returns. Some of the most common types of house flipping are:

    • Renovation Flipping is when you renovate the house after buying it and then put it on the market for sale.
    • Contract Flipping is when you find a property and transfer the rights to another buyer under contract.
    • Retailing involves buying at the retail price and then selling it for a profit on online platforms.
    • Wholesaling happens when a wholesaler puts a property on sale under contract and then finds an investor suitable for the property.

What are the benefits of a flip investment?

The primary reason to consider house flipping as an option for investment is the wealth of benefits that come with it. Let us better understand the main benefits that a flip investment offers:

    • If done in the proper manner with depth research and providing right by the demand; then flipping creates space for higher returns 
    • You undergo a bright furnishing and renovation scheme by improving assets by market standards. This will improve the overall asset quality.
    • With a smartly renovated property curated for the modern buying demand, you get better buyer portfolios.
    • The networking opportunity is wide with flipping. You can professionally meet people with similar interests, and this community building can yield a long-lasting result for you.
    • A pool of customisation opportunities
  • RELP (Real Estate Limited Partnerships)

RELP (Real Estate Limited Partnerships)

With RELPs, or Real Estate Limited Partnerships, investors have many investment opportunities. This will allow you to merge your finances and assets with those of other investors, and you can buy, sell, lease, or develop these properties. You can get a hand on the properties that are otherwise hard to access with individual finances.

Partner’s Role in RELP

A partner in the RELP structure is known for having some equity, as you. So they should be responsible for their fair share of finances and assets. Over and above this, they should fulfil their role of buying, selling, leasing, or developing the property.

Taxes and RELPs

There are no taxes on the RELPs. So the income from the RELPs will go to the individuals, who are taxed on their income.

RELP Opportunities

RELPs are a great opportunity to pool funds and invest in a high-end investment project. It offers great returns and opens many options in the real estate market.

Over and above this, you need to understand some general factors at play in the success of your investment. Here are the major points to discuss.

Success of Your Investment in Real Estate

Certain factors need to be considered to understand the underlying success of your investment in real estate. These are as follows:

  • Financial Strength

You must have a handle on your finances and assets to enter the real estate market. Also, you can join forces with other investors to have a dominant financial position in the market.

  • Know the Local Area

Knowing the local area is very important, as you need to know everything before putting a property on the market. It will only be sold if you have an idea about the needs and wants of the local market.

  • Buy and Hold

You should know the market, and only then will you be able to assess if a certain property can be deemed valuable for buying or holding. You must be aware of situations where buying would be profitable and some circumstances where selling would reap timely profits.

  • Keep it Simple

Try keeping the whole process as simple as possible. This will let you create formats and go back to these structures for further referral.

You May Also Read :

Québec real estate market Investing in Quebec real estate market
rental property investment Reason For Real Estate Investment
commercial real estate agents Guide To commercial real estate agents
real estate tax in Canada All About real estate tax in Canada
how to sell a distressed property Know About how to sell a distressed property
first time home buyer in BC Complete Guide To first time home buyer

Conclusion

Knowing the real estate needs of the market will be very handy information for your investments. After having complete knowledge of different types of investment opportunities in real estate, you can enter the industry. Making money in real estate is a non-stop process, and you can have it to your utmost benefit with the right tools.

Frequently Asked Question (FAQs) 

What is a good IRR for commercial real estate?

A good IRR is higher than the initial amount the company has invested. Ideally, the rate is somewhere around 20%.

What type of commercial real estate is the best investment?

The economy is booming, so office buildings are considered the best real estate investment.

What is the main factor in the lower property value?

The quality of the property determines its value. So, you need to check the quality in case your property valuation is low.

What makes a property expensive?

There are many factors, including localities, demand graphs, availability in the market, infrastructure, and interiors.

What is the ROI of commercial real estate?

No one variable determines this, but as a rule of thumb, if you take a higher risk, you can gain a higher ROI in commercial real estate.