Why Should You Invest in Real Estate?

By: Sylvia Smith

Why Should You Invest in Real Estate?




Are you considering investing in real estate but are allowing fear to hold you back?  Investing is all about diversification – that is what we are told when we invest in the stock market.  Here is why you should seriously consider adding real estate to your investment portfolio. 

Real Estate Prices – Last 10 Years

real estate, return on investment, ROI
Are you aware that in the GTA (Greater Toronto Area) in 2005 the average home sale price was $622,116 and in 2010 it was $431,262?  In 2020 the average sale price was $929,699 that is a 115.5% increase in 10 years!!  But hold on, that isn’t the only advantage in investing in real estate.  If you invest in the buy, hold and rent strategy – your tenants most likely pay your mortgage, insurance, property tax, maintenance and you will most definitely still have cashflow left over after the expenses are paid.  Plus the extra bonus is that you can leverage bank money to purchase real estate so your ROI (return on investment) has just exploded. 
Real estate is not expected to slow down any time soon.  Even during the pandemic real estate has continued to appreciate and has remained robust.  With low-interest rates and increased immigration over the next several years, it is expected that we will continue to see real estate appreciation for some time.  
Is real estate investing starting to sound more appealing?

Where to Start – Education!

  learn, educate
The key to getting started and eliminating any hesitation you may have is to educate yourself.  Time invested upfront educating yourself will save you tons of time in the long run. 
There are various real estate investing strategies, pick the one that feels right for you given your skills, lifestyle, and investment timeframe.  Educate yourself on what is happening in different communities, possible rents, maintenance costs, etc.  Also, consider if you want to have hands-on involvement or hands-off.  I have written a blog on the various investment strategies that you may find helpful.  Engaging a realtor that has real estate investment experience can really expedite your learning curve, and she/he will be able to guide you on tips and best practices in purchasing and managing investment properties. 

Cash Flow is King

cash flow
When investing in real estate the first priority is to ensure the numbers make sense before placing an offer.  If the property doesn’t cash flow keep looking.
Cash flow is the money you make from rental properties every month after all expenses are paid.  The beauty of cash flow is that over time it increases.  Cash flow increases over time because rents will bo up with inflation while your mortgage payments stay the same or possibly decrease as you pay down your mortgage.

Leverage – Makes So Much Sense

home equity, leverage, mortgage
Cash flow and rental income is my favorite part of owning real estate, close second is leverage.  Did you know that real estate is one of the easiest assets to leverage?  Not only is it one of the easiest to leverage the financing of, but the leveraging terms are incredible compared to any other type of loan.  There are many ways to leverage real estate to purchase more real estate such as:  buy real estate improve its value then refinance it to recover 100% of the capital used to purchase it. Or if you already own real estate use the equity to buy more real estate without spending any of your hard-earned money.
Are you intrigued?  Do you have any questions?  Reach out and let’s chat.