When most people think of real estate, they think of their homes. Did you know that real estate offers a host of different investment options though? Did you know that some of these avenues aren’t even physical properties? Keep reading to learn how and why to invest in real estate!
As we’ve outlined before when it comes to buying and selling, real estate is historically a sound and solid investment given its appreciation over time. Something that differentiates real estate from other investment avenues is its direct utility as a living space, be it a home, rental, or vacation spot. Another unique quality of real estate is that you can invest without having the full amount at the start and instead pay it down via a mortgage.
Rental and vacation properties
Rental properties are a popular form of real estate investment because they are a direct investment. Whether you have a townhouse you rent out to a family or a chalet you put up on Airbnb, a direct investment means owning and operating the property. For hands-on people, owning a rental property is a great way to have an active project (managing tenants, bookings, renovations, etc.), while also investing in the future. This investment path provides value through income (the more doors the better!) and the property’s appreciation.
Renovation projects and house flipping
Another direct form of real estate investment is purchasing a home to renovate it and then sell it. This path requires capital to both be able to pay the mortgage (whereas renting can cover or help offset this cost) AND fund the renovations (similarly for rental renovations or repairs). Whether you are purchasing something that’s undervalued, reasonably priced, or a full-on fixer-upper, the value add comes from the improvements in tandem with the property’s appreciation. If you’re a contractor or the DIY type, then this is for you!
Indirect investment options
There are also more indirect real estate investments that resemble more traditional and hands-off investments. Real estate investment groups (REIGs) are great for people who value real estate as an asset class but don’t want to deal with running the properties. A corporation or company will buy or build a set of apartments or condos and multiple investors purchase them through the company (which manages the facilities and group).
Real estate investment trusts (REITs), on the other hand, are corporations/trusts that use investor money to buy and manage properties. REITs are bought, sold, and traded on stock exchanges and the corporation pays out taxable profits as dividends — also known as regular income for you! This investment avenue is great if you don’t want to deal with any direct property purchase or lenders. Additionally, REITs allow investors access to non-residential real estate options like offices and commercial buildings.
Some other indirect ways to invest in real estate include investing in:
- The stocks of individual real estate companies
- Real estate sector mutual funds and ETFs
- Mortgage-backed securities (MBS) and bonds
Where to start?
Who knows the real estate market better than a real estate agent? We live and breathe it! With New Door, we’ll help you identify and find the ideal investment property and provide insightful advice that will save you time and maximize your investment. Our investment services include:
- Market analysis
- Needs identification
- Finding suitable properties
- Excellent returns and cap rates
- Deal negotiations
Real estate offers potential and profit regardless of the current state of the market. Whether you’re looking to start your portfolio or are already a seasoned investor, contact New Door Ottawa Real Estate Team today. We’ll help manage everything that goes into finding the perfect property with a stellar ROI!