How to Invest in Real Estate Without Fear of Rejection

How to Invest in Real Estate Without Fear of Rejection

The Canadian real estate market is hot – and you want in. But you know there can be many hoops to jump through before you score the investment property of your dreams. And one of the last, most frustrating hoops is making an offer…only to have it rejected, Unfortunately, that happens a lot.

Reasons for rejection

Putting in an offer on a property that you worked hard to find and having it rejected can be tough to take. Perhaps there was a counteroffer, but a rejection by the seller may catch you by surprise. Why would your offer be rejected? Here are the most common reasons:

  1. Your offer was too low

Many sellers would counter a low-ball offer in hopes of driving the price higher. But some sellers may just throw out that low offer altogether, especially if they hear of other buyers willing to go higher. And if your offer was very low, and insulted the seller may be unwilling to entertain it at all.

2. Your finances are weak

These days, sellers want to make sure that prospective buyers are at least pre-approved for a mortgage to finance the purchase. If you haven’t spoken with a mortgage specialist yet, there’s no way for the seller to verify whether or not they’re wasting their time with your offer. Instead, they’ll be much more willing to accept an offer from a buyer whose finances are already in order.

3. Your deposit was too small

While your purchase price is a key component of your offer, the seller will also consider the size of your deposit. A large deposit shows the seller that you are financially strong: capable of supporting a home purchase. A small deposit looks weak and could scare off the seller.

4. Your closing dates don’t line up

Matching closing dates help smooth real estate transactions. For instance, sellers who have already bought a new property may want a short closing date so they’re not stuck with two mortgages. Or perhaps the seller has yet to find another home and doesn’t want to risk having anywhere to go. In this case, the seller may want a longer closing date. Either way, if your proposed closing date doesn’t align with the seller’s needs, your offer may be rejected.

5. The seller maybe unwilling to compromise

If the home inspection reveals issues with the property, you may request to have the seller make repairs. But if the seller is unwilling to put in any more work on the home before selling and you can’t reach a compromise, your offer may be rejected.

Aside from the outright rejection of your offer, there are other difficulties that you can encounter in a competitive market, such as bidding wars. But the biggest hurdle to investing in real estate is money. These days, real estate prices are through the roof, especially in certain cities. Many would-be investors simply don’t have the financial means to get started, especially if they are buying a property on their own.

Fortunately, there are other ways to get a foot in the door – even with minimal capital – including “fractional” investing.

Fractional investing in real estate 

In fractional investing, several parties purchase the property: each has its own share and each assumes its share of the risk. For instance, if a property sells for $500,000 and you put in $10,000, you own 2% of that property.

Unlike full ownership, fractional ownership allows investors to diversify their portfolios, reducing risk while getting access to high-value assets. It also eliminates many of the hassles: searching for properties, putting in offers, managing tenants, and maintaining the property.

Who offers fractional investment?

Fractional investing reduces the barriers to entry for investors just starting out in the real estate market. But where can you find these investment opportunities?

BuyProperly is an online platform for fractional real estate ownership: it gives investors with limited capital – as little as $2,500 – the chance to buy into a property without the headaches that usually come with being a landlord.

The expert team at BuyProperly thoroughly vets the high-value, high-growth, buy-to-let properties available for investment. And BuyProperly’s local property managers handle “landlording,” hassles: maintenance, improvements, tenant searches, rent collection…..

Investors can earn monthly rental dividends while watching the property value grow over time. If or when the property is eventually sold, all the investors can capitalize on the increase in equity.

Benefits of fractional ownership 

There are plenty of reasons why investors — particularly beginners with minimal capital or experience — might want to go the fractional investment route:

  • Minimum capital needed. Traditional real estate deals require tens of thousands of dollars (or more); fractional investing requires as little as a couple of thousand dollars to get started.
  • Increased diversification. Adding a real estate property to your investment portfolio is a great way to help you hedge against risk.
  • High return potential. Real estate is known to increase in value over time: this can help increase your returns, especially as renters help pay the mortgage.
  • Asset tangibility. Unlike stocks, real estate is a real-world asset, which can offer both growth potential and intrinsic value.
  • Tax breaks. When the property is eventually sold, you’ll get taxed only on capital gains, rather than having your entire return taxed as income.

 

How do you earn returns with fractional ownership? 

Like any other type of real estate investment, fractional ownership pays out in two ways:

  • Through rental income. Depending on how much you invest and your exact share in the property, you’ll collect rental income relative to your share.
  • Profit when the property is sold. Over time, the property will likely increase in value, which helps add to your equity in it. You’ll be able to recover your initial investment, plus your share of any profits.

 

 

Should you invest with BuyProperly?

 

If you’re interested in investing in real estate but haven’t yet, because of done so because of all the hurdles, BuyProperly may offer a solution.

In particular, BuyProperly may be an ideal investment platform for those who:

  • Want to invest a modest amount of money
  • Want to avoid managing the property and dealing with tenants
  • Want to diversify their investment portfolio
  • Want help choosing the right property to invest in

 

Our final thoughts

There are plenty of benefits to investing in real estate: passive income, regular cash flow, tangible assets that grow in value, investment diversification, and tax advantages. But getting involved in real estate investment can be tough for many. BuyProperly makes getting your foot in the door is much easier. You can start investing with as little as $2,500 and see potential annual returns of 10–40%. And you can kiss that fear of rejection goodbye.

Grow Your Wealth

Grow Your Wealth While Managing The Risks With Diversification

Grow Your Wealth While Managing The Risks With Diversification

Introduction

Every investment carries some amount of risk. Since markets can be volatile and unpredictable, diversifying your portfolio helps maximize returns over the long term as well as better protect yourself against unexpected market downturns.

This article will talk about what diversification is, its importance, and how you can diversify your investment portfolio. Moreover, we will also shed some light on the benefits of illiquidity and how real estate investments can help you enhance your returns.

Let’s get started!

Diversification: Why It’s Crucial for Your Portfolio?

Diversification is the most crucial step in risk management. It is the investment technique of holding unrelated investments across asset classes that react differently to social and economic events.

Diversification is a technique that is crucial for investors to reach their long-term goals as it enables them to hedge against unsystematic risk and build wealth over a period across different asset classes. Using diversification, an intelligent investor reduces the risk by planning carefully and allocating funds across various asset classes.

For instance, in a growing economy, stocks generally outperform bonds. However, when market conditions change, bonds hold their value, whereas stock prices tumble. Thus, if a smart investor diversifies their investment portfolio and holds both stocks and bonds, they can reduce their overall exposure to such change in market conditions and mitigate the risks of their portfolio taking a big hit.

Investment Portfolio Diversification: How to Achieve it?

An investor can diversify their portfolio by using the asset allocation strategy, which involves selecting a combination of investments based on the investors’ risk profile, financial goals, and time horizon.

Each asset class available to investors have different risk-reward ratios, and thus, each performs differently in varying market conditions. For instance, while stocks are more volatile and risky in comparison to bonds, they also offer the potential for higher returns.

Some of the standard asset allocation classes include the following:

  • Equities (Stocks and ETFs)
  • Fixed Income Bonds
  • Real Estate
  • Gold
  • Cryptocurrency
  • Collectables
  • Cash and cash equivalents

Diversified Portfolio Example

Source: Cary Stamp & Co.

While diversification is essential, it’s equally important not to over diversify. The best way for an investor to do so is to keep their portfolio at a manageable level that varies for each investor based on their financial goals and risk profiles. For instance, avoiding diversification for some investors could mean only holding six assets in different industries that they are confident about. Whereas, for others, it could mean avoiding investment in certain asset classes that they don’t understand, just for the sake of diversification.

The Benefits of Illiquidity

Liquidity refers to the ease with which an asset can be converted to cash and cash equivalents without losing market value. In general, it is seen that liquid assets such as stocks are more volatile in nature. Thus, to capture the benefits of illiquidity, long-term investors may prefer allocating funds towards illiquid assets.

Typically, illiquid assets have a low correlation to the broader stock market, and thus, they are less volatile in nature, and their value remains stable over a more extended period. As a result, such investments are considered low beta investments that are less risky but offer lower returns. As a result, such investments help minimize portfolio losses when the market sees a downturn.

How to Enhance Portfolio Diversification Using Real Estate

Real Estate Investment is the process of purchasing property to either rent it out or sell it to make a profit. As an asset class, real estate is mainly used for diversification purposes and has helped investors amass generational wealth.

Diversifying your portfolio by investing in real estate offers the following benefits:

  • Long-term stability – Real estate market is seen as one of the most stable financial markets. Thus, real estate investment is considered to be a less volatile and stable long-term investment opportunity.
  • Usability – Real estate is a tangible asset that investors can use for renting out or for personal use. For example, real estate bought for diversification purposes can be rented out and used to generate additional income.
  • Mitigating Risks – Real estate is an illiquid asset and thus, is not highly correlated to the stock market. Hence, many investors use real estate to hedge their risks against more volatile assets in their portfolios.
  • Tax Benefits –  Governments in many countries offer tax benefits on real estate investment to promote the sale of properties in the country and boost the economy.

Additionally, there are many different ways through which investors can invest in real estate. They are as follows:

  • Real Estate Investment Trusts (REITs) – REITs enable investors to invest in real estate even with small amounts of money. Shares of REIT stocks can be bought and sold in the market just like any other publicly listed company.
  • Crowdfunding Real Estate Platforms – These online platforms let investors take a more hands-on approach and invest in specific real estate development projects.
  • Investing in Rental Properties – Purchasing rental properties enables investors to add an alternative source of cash flow and earn some additional monthly income.

Important Questions to Ask About Your Portfolio Diversification

To diversify your portfolio successfully, an investor first needs to understand the fundamentals of diversification and ask the right questions to evaluate how these fundamentals apply to their specific portfolio.

Here are some critical questions about your portfolio diversification to evaluate your diversification strategy and make more informed choices.

  1. What is my risk tolerance? – This changes according to investment objectives and time horizon. Each asset class has different risks. Hence, investors must choose an asset class that is suitable to their risk tolerance.
  2. What is my risk-adjusted rate of return? – This question answers how well you are being compensated for the amount of risk you’re taking.
  3. How many asset classes should I invest in? – While diversifying your portfolio, it’s important to look for a wide range of asset classes.

Closing Thoughts

As an investor, to achieve your long-term financial goals, you need to balance your risk and reward. Diversification allows you to choose a mix of assets that reduce the risk of losses in the market. Thus, it’s essential to find the right balance between risk and return and select a mix of assets that can help you achieve your financial goals while limiting your exposure to unsystematic risks.

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