Investing in a Volatile Market: Strategies to Succeed

It’s no secret that the current market is incredibly volatile. Prices are bouncing all over the place, and it can be hard to know what’s the right thing to do when it comes to investing in your future. 

In this blog post, we’ll go over some of the strategies you can use when investing in a volatile market, as well as some common mistakes people make during times like these.

So whether you’re a seasoned investor or just starting out, read on for some valuable insights!

what happens during periods of market volatility?

During periods of market volatility, prices tend to go up and down rapidly, making it hard to predict which way the market will move next. This can be a scary time for investors, as there is always the possibility of losing money. However, it’s important to remember that market volatility is normal and happens every few years.

When the stock market is volatile and inflation is on the rise, it can be difficult to know how to protect your investments. But there are some strategies you can use to help safeguard your portfolio.

Remember, there’s no “right” approach for everyone!  The best strategy for you will depend on your individual circumstances and goals. Be sure to speak with a financial advisor so you can figure out a plan that works for you.

the top 6 strategies investors can use during a period of market instability

Diversify your Portfolio

One of the best ways to protect your investments during a volatile market is to diversify your portfolio.

It means investing in a variety of different asset types, including stocks, bonds, and cash. This will help to mitigate your risk if one particular asset class starts to decline. It also means investing in a variety of geographies and investing in products.

As an example, your portfolio may include a combination of stocks from different sectors, such as healthcare, tech, and finance, bonds with different maturity dates, or different countries, like Canada, the US, and Europe.

Consider Alternative Investments 

Alternative investments can be a good way to diversify your portfolio and protect against inflation. Some examples include real estate trusts, commodities, and hedge funds.

Stay disciplined with your investing

It can be tempting to try to time the market during periods of volatility. Often, investors will veer off course in search of a great deal. However, this can be a recipe for disaster. The best way to approach investing during a volatile market is to stick to your investment plan and refrain from making impulsive decisions.  Investing longer periods of time, years rather than months helps even out the ups and downs of the market, and realize market growth over the longer term.

Review your investment mix

As market conditions change, so should your investment mix. Regularly reviewing and rebalancing your portfolio will help ensure that your investments are properly diversified and aligned with your goals. This means selling off assets that have increased in value and buying more of the assets that have lost value.

By doing this, you ensure that your portfolio stays diversified and aligned with your investment.

For example, if you’re close to retirement, you may want to adjust your portfolio to be more conservative. On the other hand, if you have a longer time horizon, you may be able to weather the ups and downs of the market and take on a bit more risk.

Be prepared for market corrections

A market correction is when the stock market experiences a sharp decline. These declines are often seen as a normal part of the market cycle. However, they can be difficult to stomach if you’re not prepared for them. Learning how to ride out a market correction will help you stay the course when your investments start to decline.

Try dollar-cost averaging

This involves investing a fixed amount of money into security or securities at regular intervals. By buying these securities over time, you’ll be able to average out the price and reduce your overall risk. This technique can help smooth out the ups and downs of the market.

With these tips, you (and your investment portfolio) will be better prepared to handle any periods of economic instability!

here are the 10 mistakes to avoid when investing during a period of market VOLATILITY

don't try to time the market

People often do this when they think the market is about to crash and they want to sell before it does. But no one can predict the future, so this strategy is often unsuccessful. If your timing is wrong, you could lose a lot of money or miss out on a rebound.

Don't invest everything at once

When the market is volatile, it’s often best to invest gradually over time. This way, you’ll be able to average out the price and reduce your overall risk.

Don't put all your eggs in one basket

As we mentioned above, diversification is key when the market is volatile. By investing in a variety of asset types and classes, you’ll be able to reduce your risk.

don't panic

It can be tempting to sell everything when the market is crashing, but this is often the worst thing you can do. If you sell too quickly, you’ll likely miss out on the rebound. Through diversification and smart portfolio management, you’ll be better prepared to avoid the dreaded “panic sell” mentality.

don't try to guess the bottom

A lot of people think they can predict when the market will hit rock bottom and start to rebound. But again, this is often unsuccessful. If you wait too long to buy, you could miss out on a lot of gains.

Don't get emotional about your investments

It’s important to remember that investments are just that – investments. They go up and down, and you need to be prepared for both. Getting too attached to your investments can cloud your judgement and lead to bad decisions.

don't forget about the fees

When the market is volatile, every penny counts. Be sure to check how much you’re paying in fees and expenses. These can eat into your returns and add up over time.

factor in your taxes

When you sell investments for a profit, you’ll likely owe capital gains taxes. Be sure to factor this in when making decisions about when to sell.

always stick to comfortable levels of risk

Just because the market is volatile doesn’t mean you should take on more risk than you’re comfortable with. Be sure to stay within your risk tolerance levels and don’t make impulsive decisions based on market fluctuations.

don't forget about your goals

When making investment decisions, it’s important to keep your long-term goals in mind. Don’t let the market dictate your decisions. Stick to your plan and stay the course.

The more you hold onto your long-term investment vision, the less likely you’ll be swayed by short-term market fluctuations.

Although it seems simple, keeping these strategies in mind will help you feel more secure as you invest and grow wealth for your future (especially when the market becomes unpredictable)!

Investing during periods of market volatility can be difficult, but there are some strategies you can use to help reduce your risk. By diversifying your investments, using dollar-cost averaging, and avoiding common mistakes, you’ll be in a better position to weather the storm.

By staying diversified, investing gradually, and focusing on your long-term goals, you’ll be well on your way to success.

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Alternative Investments: 10 New Ways to Grow Your Wealth

Are you looking to grow your wealth in new and innovative ways? If so, alternative investments may be the solution for you.

Alternative investments can include a wide range of options, such as fractional investing, venture capital, cryptocurrencies, and more. By diversifying your portfolio with alternative investments, you can help reduce your risk while also increasing your potential for earnings.

So, if you’re ready to explore some new investment opportunities, read on for more details. Not only are these investments rising in popularity and becoming part of the average investor’s portfolio, but you may be surprised at just how beneficial they can be!

10 ALTERNATIVE INVESTMENTS

fractional investing

Fractional investing is a relatively new investment opportunity that allows you to invest in assets such as real estate, art, and wine. With fractional investing, you don’t have to purchase an entire asset – you can buy a small slice of it instead.

This makes it a more affordable option for investors, and it also allows you to diversify your portfolio more easily.

Fractional investing is a great way to get started in the alternative investment market because it allows you to invest in assets that you wouldn’t normally be able to afford.

This can be a great option for people who are new to investing and want to get their feet wet.

Remember, several different platforms offer fractional investing, so be sure to do your research before choosing one.

venture capital

Venture capital is an alternative investment that involves investing in early-stage companies. This can be high-risk, but it also has the potential for high returns. This investment is great for people who are willing to take on a little more risk to potentially earn a higher return, and for anyone that loves being a part of new and innovative ideas.

If you’re interested in venture capital, you’ll need to research the companies you’re considering investing in and be comfortable with the risks involved.

private equity

Private equity is the purchase of ownership in a company that is not publicly traded. This investment is typically made by a group of investors, and the goal is to improve the company’s performance and then sell it or take it public.

Private equity investing is a great option for people who want to be more hands-on with their investments and who are comfortable with a higher level of risk. Although private equity can be high-risk, it can also offer high returns.

art

Investing in art can be a great way to add some diversity to your portfolio. Art can be a good investment for both short-term and long-term goals, and it can appreciate in value over time. Art is a great investment for people who have an eye for aesthetics and who enjoy collecting.

When investing in art, it’s important to do your research and purchase pieces that you believe will hold or increase in value.

wine

Now we come to a fun (yet often overlooked!) investment opportunity.

Like art, wine is another asset that can appreciate in value over time. Wine is a popular alternative investment because it can be enjoyed both now and in the future. Some bottles can generate returns of 10-12% per year.

However, it’s important to remember that wine is a volatile investment, so you should only invest what you’re comfortable with losing.

It’s important to do your research before investing in wine, as some types of wine are more likely to appreciate in value than others.

crypto

Cryptocurrencies are a new and exciting alternative investment. These digital currencies have seen a huge increase in value in recent years, and there is potential for even more growth in the future.

Cryptoassets, such as Bitcoin and Ethereum, have gained popularity in recent years as alternative investments. Cryptocurrencies are digital assets that use cryptography to secure their transactions and they can be bought and sold on exchanges and can also be used to purchase goods and services.

One of the biggest benefits of crypto is that there is no barrier to entry. You can get started with as little (or as much!) as you want.

Cryptocurrencies can be risky and extremely volatile, so it’s important to do your research before investing.

nfts

NFTs are a type of digital asset that is stored on a blockchain. They are unique and cannot be duplicated, which makes them valuable. NFTs can be used to represent a wide range of assets, such as digital art, land, or even cryptocurrencies.

Some well-known examples include CryptoKitties and Decentraland.

Wondering how profitable NFTs can be? In December 2021, a piece called “The Merge” sold for a whopping 91.8 million dollars!

NFTs have the potential to be incredibly lucrative, but they can also be a volatile and risky investment. It’s important to do your research before investing.

peer-to-peer lending

Peer-to-peer lending is a form of alternative lending that allows investors to lend money to borrowers without going through a traditional bank. This can be a good option for people who are looking for lower interest rates and don’t want to go through the hassle of applying for a loan.

Peer-to-peer lending also offers the potential for high returns, but it’s important to remember that it can be a risky investment.

reits

Real estate investment trusts, or REITs, are a type of alternative investment that allows you to invest in real estate without actually buying property. REITs are an excellent option for people who want to invest in real estate but don’t have the time or resources to do it themselves.

REITs are a diverse investment, and there are many different types to choose from yielding a wide variety of returns. To get started investing in REITs, you can purchase shares on a stock exchange.

private placements

Private placements are alternative investments that are not available to the general public. They are typically only offered to accredited investors, which means they come with a higher level of risk. Private placements can be a good way to get access to alternative investments that you might not otherwise have access to.

You can find private placements through a variety of sources, such as angel investors, venture capitalists, and private equity firms.

When it comes to alternative investments, there are many options to choose from. New and innovative companies, technologies, and ideas make it easier than ever to get involved in lucrative projects!

It’s important to do your research and understand the risks involved before investing. These alternative investments can be a great way to add diversity to your portfolio and grow your wealth.

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What Is Bad Credit?

Bad credit refers to a person’s history of not paying bills on time, as well as the possibility that they would do so in the future. A bad credit score is frequently the result. Companies can also have bad credit if their payment history and current financial status are not in good standing.

Because they are deemed riskier than other borrowers, a person (or company) with negative credit will find it difficult to borrow money, especially at competitive interest rates. This is true of all forms of loans, including both secured and unsecured ones, but the latter has some options.

Understanding Bad Credit

Most people who have ever borrowed money or applied for a credit card have a credit file with one of the three major credit bureaus: Equifax, Experian, or TransUnion. The information in those files is used to calculate their credit score, which is a figure that serves as an indication to their creditworthiness and includes how much money they owe and whether they pay their payments on time. The FICO score, named after the Fair Isaac Corporation, is the most widely used credit score in the United States.

  1. 35%—payment history. This is given the most importance. It simply shows whether the person with the FICO score has paid their payments on time. Even a few days late can count, yet the longer the payment is late, the worse it is viewed.
  2. 30%—total amount an individual owes. Mortgages, credit card balances, vehicle loans, any bills in collections, court judgments, and other debts fall under this category. The person’s credit usage ratio, which compares how much money they have available to borrow (such as total credit card limits) to how much they owe at any given time, is ‌essential. A high credit usage ratio (say, greater than 20% or 30%) can be interpreted as a red flag and result in a worse credit score.
  3. 15%—length of a person’s credit history.
  4. 10%—mix of credit types. Mortgages, vehicle loans, and credit cards are all examples of this.
  5. 10%—new credit. This includes any jobs or internships that someone has recently started or applied for.
Examples of Bad Credit

FICO scores range from 300 to 850 and debtors with scores of 579 or lower are typically considered having poor credit. 

Fair is described as a score between 580 and 669. These borrowers are significantly less likely to default on loans, making them far less hazardous to lend to than individuals with poor credit scores. However, consumers in this range may incur higher interest rates or have difficulty obtaining loans than borrowers with credit scores closer to the top 850.

How to Improve Bad Credit

There are things you may take if you have low credit (or fair credit) to raise your credit score above 669 and keep it there. Here are some pointers on how to do just that.

Set Up Automatic Online Payments

Do this for all of your credit cards and loans, or at the very least, sign up for the lenders’ email or text reminder lists. This will ensure that you pay at least the monthly minimum on time.

Pay Down Credit Card Debt

Whenever workable, pay more than the minimum payment due. Set a reasonable payback target and strive toward it over time. Paying more than the minimum due will help you increase your credit score if you have a lot of total credit card debt.

Check Interest Rate Disclosures

These disclosures are provided by credit card accounts. Concentrate on paying off the debts with the highest interest rates first. This will free up the most money, which you can then use to pay down other obligations with lower interest rates.

Keep Unused Credit Card Accounts Open

Keep your unused credit card accounts open. Also, don’t create any new accounts that you don’t require. Either action has the potential to harm your credit score.

If you’re having trouble getting a conventional credit card because of your bad credit, consider applying for a secured credit card. It works in the same way as a bank debit card in that you can only spend the amount you have on the deposit. Having a secured card and making timely payments on it can help you rehabilitate your credit and eventually qualify for a regular card if you have a low credit history. It’s also a wonderful approach for young individuals to build their credit history.

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How to Invest in Real Estate with Little Money

options are still available

It’s true, you can absolutely purchase property with little or no money available. How? By using some of the following creative financing techniques.

Before we dive in, have you considered fractional real estate investing? This is a new, but very attainable way to invest in real estate.

Why alternative forms of real estate investing are becoming more popular

In recent years, alternative forms of real estate investing have become more popular with investors who are looking to buy a property with little or no money down. This is because traditional forms of financing, such as bank loans, are becoming harder to obtain.

With house prices rising across Canada and the United States, it’s becoming increasingly more difficult for people to “buy in” to the real estate market.

To purchase an investment property, most lenders require a 20-30% down payment. This could be anywhere from $20,000 up to $200,000 or more just for a single-family, residential property!

On top of land transfer taxes, surveys, inspections, and lawyer’s fees, these expenses are enough to push many investors out of the market.

Ongoing real estate expenses
Aside from your down payment and closing costs, investing in real estate also comes with monthly expenses. These include:
  • Insurance
  • Property taxes
  • Maintenance and repairs
  • Condo and management fees
  • Mortgage payments + interest
  • Rental and vacancy expenses
  • Ongoing property management

This means that investors need to set aside even more money to handle monthly expenses that come up. Is it possible to invest in real estate without having a large amount of capital available? AbsolutelyLet’s explore some of the most common ways to invest in real estate with little money.

Fractional investing

 

Fractional investing is a newer concept that’s gained popularity in recent years. It allows investors to pool their money together to purchase a share of an investment property.

This type of investment is often made through a real estate crowdfunding platform, which connects investors with developers who are looking to finance their projects.

With fractional investing, you can spread your investment amount over multiple properties, which also helps to mitigate risk and increase your diversification.

It’s also a great way to get started in real estate investing with little money as you can typically invest as little as $2500.

Seller financing

 

Another option for investors looking to buy a property with little money down is seller financing.

With this type of financing, the seller agrees to act as the bank and provide you with a mortgage. This could be in the form of an interest-only loan or a balloon payment loan.

Seller financing can be a great option for both buyers and sellers. The buyer gets to purchase the property with little money down and the seller gets their asking price for the property.

REITs

 

REITs, or real estate investment trusts, are another way to invest in real estate without having to put down a large amount of money. REITs are companies that own and manage income-producing properties, such as office buildings, shopping malls, apartments, and warehouses.

REITs are traded on stock exchanges and can be bought and sold just like any other stock. This makes them a liquid investment, which is ideal for investors who want to cash out quickly if needed.

Since REITs are traded on stock exchanges, they also offer the potential for growth through capital appreciation.

The downside of investing in REITs is that they’re subject to the ups and downs of the stock market. This means that your investment could lose value if the stock market declines. In addition, there are fees associated with owning a REIT and you often don’t have any transparency about the properties that you are investing in.

Lease-options

 

A lease option is another creative way to invest in real estate with little money down. With a lease option, you agree to lease a property from the owner for a set period.

The length of the lease will depend on the agreement between the buyer and seller, but it’s typically 1-5 years.
During the lease period, the buyer has the option to purchase the property, but they’re not obligated to do so.

Lease options are a great way to get into a property without having to put down a large amount of money. The downside is that you’re not guaranteed to purchase the property at the end of the lease period.

Wraparound mortgages

 

A wraparound mortgage is another financing option for investors looking to buy a property with little money down. With a wraparound mortgage, the buyer agrees to make payments on the existing loan and takes over responsibility for the property.

The buyer then charges their own tenant a higher rent amount and uses that money to make the monthly payments on the mortgage.

Wraparound mortgages can be a great way to get into a property with little money down, but they’re not without risk. If the tenant doesn’t pay their rent on time, the investor could be responsible for making the mortgage payments.

House hacking

 

House hacking is a strategy that allows investors to live in the property they’re purchasing while renting out the other rooms to tenants.

This is a great way to get started in real estate investing as it allows you to live in the property while someone else helps to pay the mortgage.

House hacking can be done with any type of property, but it’s most commonly done with multifamily properties, such as duplexes and triplexes.

The downside of house hacking is that it can be a lot of work. The investor is responsible for finding tenants, collecting rent, and maintaining the property.

Subject-to properties

 

A subject-to-property is a property that’s purchased with the existing mortgage in place.

With this type of purchase, the buyer takes over responsibility for making the monthly mortgage payments, but the seller remains on the hook for the loan.

Subject-to properties can be a great way to get into a property with little money down, but they’re not without risk. If the buyer stops making the mortgage payments, the property will go into foreclosure and the seller will be responsible for any deficiency.

Contract for deed

 

A contract for deed is an agreement between a buyer and seller that allows the buyer to purchase a property while making payments over time.

The buyer doesn’t take ownership of the property until the contract is paid in full.

Contracts for deeds are a great opportunity for buyers, but they’re not without risk. If the buyer stops making the payments, the seller can cancel the contract and evict the buyer from the property.

Joint ventures

 

A joint venture is an agreement between two or more people to work together on a specific project.

In the context of real estate investing, a joint venture is an agreement between two or more people to purchase a property and share in the profits.

Joint ventures are a great way to get into a property with little money down as they allow you to pool your resources with another person or group of people.

The downside of joint ventures is that they can be complex and there’s always the risk that one party will default on the agreement.

Crowdfunding

 

Crowdfunding is a way of raising money from a large group of people.

In the context of real estate investing, crowdfunding allows investors to pool their resources and invest in a property together. Although similar to a fractional model, crowdfunding focuses more on raising capital as opposed to investing in fractional shares of a property.

Crowdfunding platforms such as RealtyMogul and Fundrise make it easy for investors to get started in real estate with little money down.

The downside of crowdfunding is that it’s often a hands-off investment and you’re relying on the platform to manage the property.

Sweat equity

 

Sweat equity is the value of the work that you put into a property.

For example, if you purchase a fixer-upper and put in the time and effort to renovate it, your sweat equity would be the value of the renovations that you did.

Sweat equity can be a great way to get into a property with little money down since it opens up opportunities to get lower-priced properties with huge potential for appreciation. Keep in mind, if the property doesn’t appreciate in value or if the renovations take longer than expected, you could end up losing money on the deal.

Options

An option is a contract that gives the buyer the right, but not the obligation, to purchase a property at a set price within a certain period.

Options are a great way to get into a property with little money down as they allow you to control the property without having to put up all the cash for the purchase price.

The downside of options is that they can be complex and there’s always the risk that the property will decrease in value, leaving the buyer with an option that’s worth less than the purchase price.

There are several ways to get into real estate with little money down. 

The best option for you will depend on your individual circumstances. If you’re looking for a hands-off investment, crowdfunding may be the way to go. If you’re willing to put in the work, a subject-to-property or a fixer-upper may be the best option. Fractional investing is a great option for people who want to own a piece of real estate without the headaches that come along with maintenance and management.

Whatever route you decide to take, do your research and understand the risks involved.
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What Is Collateral?

what is collateral?

Collateral is a term used to describe an asset that a lender accepts as security for a loan. Depending on the purpose of the loan, collateral can be real estate or other types of assets. For the lender, the collateral serves as a type of insurance. If the borrower defaults on their loan payments, the lender can seize and sell the collateral to recoup some or all of their losses.

how collateral works

A lender wants to ensure that you’ll be able to repay the loan before giving it to you. As a result, many of them require some level of protection. Collateral is a type of security that reduces the risk for lenders and ensures that the borrower fulfills their financial obligations. If the borrower defaults, then the lender has the option to seize the collateral and sell it, with the proceeds going toward the unpaid amount of the loan. To reclaim any leftover balance, the lender can take legal action against the borrower. 

As previously stated, collateral can take many forms. It usually refers to the type of loan; for example, a mortgage is secured by the residence, but a car loan is secured by the vehicle in issue. Other assets can be used to secure non-specific personal loans. For example, a secured credit card can require a cash deposit equal to the credit limit, such as $500 for a $500 credit limit.

Collateral-backed loans often have lower interest rates than unsecured loans. A lien is a legal right or claim on an asset to satisfy a debt that a lender has on the collateral of a borrower. The borrower has a powerful incentive to repay the loan on time because, if they don’t, they risk losing their home or other collateralized assets.

types of collateral

The type of loan frequently determines the nature of the collateral. Your home becomes the collateral when you take out a mortgage. If you take out a car loan, the car becomes the loan’s collateral. Cars, bank savings deposits, and investment accounts are all frequent forms of collateral that lenders accept. In most cases, retirement accounts are not accepted as collateral.

Future paychecks can also be used as security for very short-term loans, not just payday loans. Traditional banks provide such loans, which are typically for a few weeks. Even if you have a true emergency, you should read the fine print and compare rates before taking out one of these short-term loans.

COLLATERALIZED PERSONAL LOANS

A collateralized personal loan is a type of borrowing in which the borrower pledges an object of value as security for the loan. The collateral must be worth at least as much as the loan amount. If you’re looking for a secured personal loan, your best bet is to go with a financial institution with which you already do business, especially if your collateral is your savings account. If you already have a relationship with the bank, it will be more likely to approve the loan and provide you with a reasonable interest rate.

Examples of collateral loans

RESIDENTIAL MORTGAGES
A mortgage is a loan that uses your home as collateral. If a homeowner fails to pay their mortgage for more than 120 days, the loan company can initiate legal action, which could result in the lender taking possession of the home through foreclosure. The property might be sold to satisfy the remaining principal on the loan once it has been transferred to the lender.
HOME EQUITY LOANS
A home can also be used to secure a second mortgage or a home equity line of credit (HELOC). The loan amount will not exceed the available equity in this scenario. For example, if a home is worth $200,000 and the primary mortgage balance is $125,000, a second mortgage or HELOC will only be available for up to $75,000.
MARGIN TRADING
Margin trading also considers securitized loans. An investor uses the balance in his or her brokerage account as collateral to borrow money from a broker to gain shares. The loan increases the number of shares an investor can purchase, hence boosting the potential gains if the value of the shares rises. However, the risks are amplified as well. If the value of the shares drops, the broker will demand payment of the difference. If the borrower fails to cover the loss, the account acts as collateral.

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What is an Accredited Investor?

FIRST THINGS FIRST, WHY ACCREDITED INVESTING?

Accredited investing opens up a whole shiny new world of investing made available to you. These include private equity, venture capital, angel investing, and hedge funding.  

WHAT IS AN ACCREDITED INVESTOR?

The accredited investor is someone who has a special status so that they can have investments that are typically more high-risk. While this definition varies from country to country, it also varies from province to province. While there’s no formal process in Ontario, legislation requires that you meet specific criteria to participate in certain investments. This simply means you’ll need to be prepared to provide documentation proving you meet the criteria.

THE CRITERIA

 According to the Ontario Securities Commission (OSC), an accredited investor means you have a:

  • Net income before taxes of more than $200,000 in each of the two most recent calendar years and expected net income of more than $200,000 in the current calendar year.
  • Net income before taxes combined with a spouse of more than $300,000 in each of the two most recent calendar years and expected combined net income of more than $300,000 in the current calendar year.
  • Financial assets, alone or with a spouse, of at least $1 million before taxes but net of related liabilities
  • Financial assets include cash and bank deposits but not the value of a house.
  • Net assets, alone or with a spouse of at least $5 million. Net assets generally include all of your assets after subtracting your debt.

Contact the OSC’s Inquiries & Contact Centre to learn more about these rules.

Are you an accredited investor?

Multifamily Property Real Estate Investing: The Pros and Cons

Are you a brand new investor ready to start growing your real estate portfolio? Maybe you have a few investments and you’re eager to diversify and learn more about multifamily real estate investing.

No matter where you are in your investment journey, diversifying your real estate portfolio is a fantastic way to generate more cash, reduce risk, and grow your wealth.

If you’re in the market for a new investment, a multifamily property may be the perfect fit for you and your goals. Below, we’ll discuss the pros and cons of multifamily investing, along with our top tips for how you can find your first (or next) multifamily property deal.

What is multifamily real estate?

A multifamily home is essentially a single building that’s separated into units, or dwellings, to accommodate 2 to 4 families. This includes duplexes, triplexes, and quadruplexes.

Anything above 4-units is considered a “commercial” property. A house or apartment with only one dwelling is simply considered a single-family.

According to Statista, multifamily property investing shows no signs of slowing down! In 2023, there will be an expected 5.39 million multifamily properties in Canada, which is an increase from 4.96 million in 2018.

What are the pros of multifamily real estate investing?

Multifamily properties offer some incredible benefits to real estate investors. Here are some of the top reasons you should consider adding multifamilies to your real estate portfolio:

Owner-occupied arrangements

One of the biggest pros of multifamily family real estate investing is the ability to have an owner-occupied real estate investment. This means you can buy the property and live in one unit while renting out the others and collecting cash to pay down the mortgage!

This is a great opportunity to “house-hack” and start building equity in real estate quickly.

More cashflow

Another pro of multifamily investing is that your cash collected will accumulate faster. More units to be rented means more cash, which allows you to reinvest and continue building your real estate portfolio.

Less risk

Multifamily properties generally reduce your risk of full vacancy. Unlike single-family homes (when losing a tenant means you’re at 100% vacancy) multifamily properties give you the opportunity to spread out cash flow between 2-4 dwellings.

This means a non-paying tenant or sudden vacancy won’t hit you (and your bank account) as hard.

Simplified management

Looking after several “doors” under one roof tends to be easier on managers. There are fewer independent buildings to keep track of and less travel required for inspections, emergencies, and general maintenance. This means you’ll save on property management fees, and you’ll have fewer headaches if you manage the property yourself.

Tax benefits

Owning multifamily properties means you can take advantage of great tax benefits. You’re able to deduct maintenance fees and operating costs including utilities, management fees, insurance premiums, and marketing costs.

What are the cons of multi-family real estate investing?

Although there are some incredible benefits to owning multifamily properties, there are some drawbacks that come along with this type of investment.

Let’s go over them in detail.

High market entry costs

Generally, multifamily properties are significantly more expensive than single families which limits many people from being able to start with this type of investment. The price tag is often hundreds of thousands (or even millions) of dollars depending on your market.

Higher degree of management required

Many investors choose to manage single families and duplex properties on their own, but once you start investing in 3 and 4-unit buildings, property management becomes incredibly important.

Great property managers will help keep your units full of happy tenants by filling vacancies quickly, collecting monthly rents, performing routine maintenance, responding to requests for repairs, and conducting regular inspections of the building.

More units means more tenants which, inevitably, means a higher degree of management is needed to keep the property cash flowing.

Expensive maintenance

Multifamilies tend to incur higher maintenance costs. Instead of maintenance and repair costs on one unit, multifamily investors need to worry about 2-4 units! This cost is easily offset by the increased cash flow, but new investors should be prepared for potentially higher maintenance and repair costs upfront.

The good news? 

No matter which type of property you choose to invest in, you can do it even with limited cash on hand. Through fractional investing, BuyProperly allows people to invest in real estate for as little as $2500. This means your dreams of adding a rental unit to your portfolio are 100% achievable! Want to learn more? Visit www.buyproperly.ca to get started on your real estate investment journey.

What should you look for in multifamily real estate investing?

The property you purchase should 100% depend on your goals.

If this is your first real estate investment or if you’re hoping to “house-hack” and buy something smaller to offset your mortgage costs, a duplex is a great option. Similarly, if you want to manage the property yourself and keep your portfolio small, stick with a 2-unit.

If you’re working with investment partners, you want more cash flow, or you’re looking to grow your portfolio quickly, consider a 3 or even 4-unit property!

You should also consider how much time and money you’ll have to dedicate to your new investment.

If you’re a full-time investor ready to dive in and you’re not afraid of some hands-on management, a larger building may not seem so intimidating to you.

Many of the investors who purchase multifamilies through BuyProperly are looking for a more “passive income” project where they can grow wealth and see returns without having to be involved in the day-to-day management. If that sounds like you, sign up to view a list of their available properties.

We’ll talk more about how to evaluate multifamily properties in a moment.

How to find your first multifamily real estate deal

If you’ve weighed the pros and cons and decided multi-family real estate investing is the way to go, it’s time to find your first property deal!

The first thing to do when you’re looking for the right multifamily property is to contact a local realtor. They often have connections, opportunities, and deals that aren’t listed on public websites. They also tend to have great networks with other investors who may be interested in partnering with you.

Second, join all the local networking groups you can. Find Facebook groups, forums, and local meetups to connect with other investors to talk about real estate. Some of the best deals can be found through word-of-mouth and networking!

Third, consider investing out-of-town. If your local market doesn’t have a lot of availability or it’s too expensive, consider expanding your property search to neighbouring towns and cities. With the right management company, out-of-town multifamily investments can be incredibly lucrative!

Ready to invest in your next property deal?

BuyProperly offers people an opportunity to get into the real estate market using a fractional investing model. This means you can start with as little as $2,500 and see projected annual returns of 10-40%. See a list of their available properties right here.

How to evaluate a multifamily property for sale

Unlike single-family properties, multifamily units tend to be more complex and there are several factors to consider when trying to figure out whether or not to make an offer on that listing!

Here are some important things to keep in mind:

Total units

Does the multifamily property you’re considering have 2, 3, or 4 units? How does this fit your goals? Keep in mind, larger properties may come with a larger price tag but they also yield higher returns.

It’s also important to know your local rules and requirements. In some areas, triplexes and quadruplexes must be registered with the city and cooperate with additional yearly inspections. Speak with your local realtor and city officials to learn more.

Potential cashflow

Cash flow is everything and all potential investors need to have a realistic picture of how much money they can collect every month.

How much rent are tenants currently paying each month? Also, how much rent could you potentially charge based on the condition and location of the property?

Operating costs

Cash flow is obviously incredibly important, but it doesn’t mean much if the operating expenses put you in the red each month!

Make sure to collect information about all the ongoing operating expenses for the property so you can properly calculate your net profit. This includes taxes, utilities, insurance, management, etc. Don’t forget to account for potential vacancies in your calculation (it’s a safe bet to assume a 10% vacancy).

Repairs needed

When assessing whether or not to buy your next multifamily, it’s important to carefully consider all upcoming repair costs. Because multifamily buildings tend to be larger than single families and have more units to take care of us, those upfront costs are normally higher.

When purchasing, make sure you have enough money in the bank to make the necessary repairs to keep your new tenants!

CAP Rate

Calculating Cap Rate is important because it tells you how quickly you’ll be able to pay off your investment. It’s a quick snapshot of your income and expenses as they relate to the price of your property.

Here’s how to calculate it:

First, find out your gross income (rent) each month and multiply it by 12 to get your number for the year.

Next, subtract all of your operating expenses for the year. This will give you your yearly net operating income.

Gross income – operating expenses = net operating income

Now, divide the net operating income by the total purchase price. Multiply this number by 100 and you’ll have your Cap Rate. The higher the Cap Rate, the higher the annual return on investment, and the quicker you’ll make your money back!

Generally, most investors like to stay above a 4% Cap rate. This varies from person to person and it’s important to consider your personal goals when using Cap Rate to assess a real estate deal.

Location and rental potential

The location of a building plays a crucial role in assessing its’ future cash flow potential. How desirable is the area? Is it near schools, shopping malls, and other city services? How is transportation to and from the location? Are there any plans to develop the surrounding area OR add neighbourhood features that would make the property even more attractive?

Location is everything and it’s an important consideration when buying your next multifamily property!

Conclusion: Should you invest in multifamily properties?

Multifamily real estate is an incredible opportunity for both new and seasoned investors.

These deals can help you grow your portfolio quickly, provide increased cash flow, and reduce your vacancy risk. You’ll also be able to take advantage of some great tax benefits.

But, multifamily isn’t right for everyone. If you’re prepared to handle multiple tenants (or pay a property manager who can) and you’re not scared away by higher operating costs and maintenance fees, you should strongly consider adding a duplex, triplex, or even quadruplex to your portfolio!

Want to learn more about how you can start investing in real estate for as little as $2,500? Schedule a call with BuyProperly to learn more!

Millennials struggle to achieve their real estate dreams using traditional investments

Millennials struggle to achieve their real estate dreams using traditional investments

A KPMG poll shows soaring house prices and rising personal debt are making it nearly impossible for Canadian millennials — even those with high-paying jobs — to afford a home.

Statistics released by the Canadian Real Estate Association show national home sales set another all-time record in February 2021.

Owning a house has always been a major life milestone, or it used to be until millennials stopped chasing it. Often judged for living in their parent’s basement way past their welcome, millennials have had to delay investment in real estate. In many ways, the traditional model of real estate investment is working against them.

Rising Costs, Student Debt and Complicated Process

Home prices continue to rise, and so does the average age of millennials staying at their parents’ home. In today’s market, young first-time homebuyers juggle student debt, rising home prices, and stringent mortgage requirements.

The most educated generation ever is finding that paying down their student debt is delaying their ability to save up for a down payment on a home. With rising prices, the down payment required keeps increasing.

While real estate is arguably the best source of passive income, small investors cannot enter the market because they don’t qualify for loans, don’t have stable jobs to make regular mortgage payments, or can’t arrange for the down payment.

The complicated path to real estate investing is a barrier for millennials, who seek hassle-free and transparent processes. However, platforms like BuyProperly have created a solution that eliminates the entry barriers to high-yield real estate investments. Learn more about owning a fractional real estate asset here.

Despite being a high yield investment opportunity, entering the real estate market in Canada is considered a pipeline dream by most millennials due to high costs and student debts.

According to a recent Canadian KPMG study, 72% of millennials say their goal is to own a home. The study polled 2,500 Canadians, including 1,000 millennials between the ages of 23 and 38, who are now the most populous generation in the country.

The study also showed that 46% of millennial homeowners received a financial boost from their parents that allowed them to buy a home. Further, 38% believe their house won’t be worth as much in the future.

This data showed that millennials are earning more than earlier generations due to their higher education levels. However, they are not necessarily better off. Purchasing a home has been the most trusted way to build generational wealth, but it is trickier today than ever.

“It seems pretty clear that millennials are in a unique situation in terms of their ability to purchase a home,” says Martin Joyce, Partner and National Leader of Human & Social Services at KPMG.  “Purchasing a home has historically been a foundation for retirement stability.”

For many millennials, the idea of taking on a huge mortgage right after paying off student debt feels like debt deja vu. But a lifetime of renting means that they miss out on the opportunity to invest in the real estate market, which has been the most stable investment pool and retirement fund.

Many millennials save for a down payment and qualify for a loan, but lack the knowledge of the process to purchase and maintain a home. Plus, they’re wary of hidden costs and issues.

Fractional Real Estate Investments

In response to this predicament, new solutions have emerged to tap into the  real estate market. Canada has seen a boom in fractional real estate ownership, which lets you invest in a share of a high-yield property. These properties are selected after stringent due diligence and are selected to ensure high-yield returns so that a small sum can also become a long-term passive income source for millenials.

Khushboo Jha, the founder of the AI-powered fractional real estate investing service BuyProperly, was motivated to begin her own firm after she saw the obstacles in the real estate investment industry for small investors.

“The recent reports are an accurate description of the situation on the ground,” says Jha. “Every day, we meet with clients who have not had access to the market simply because it is designed to welcome high net worth individuals only. Another issue which concerns first-time investors is the fear of putting all their eggs in one basket. That’s why we welcome small investments and help clients diversify their portfolio’’

BuyProperly is a Canadian online exchange that aims to democratize real estate investing by making it accessible to everyone through fractional ownership.

What is the Best Time to Invest? 4 Factors to Consider

What is the Best Time to Invest?
4 Factors to Consider

New to investing? Maybe you’ve heard of the investing technique of timing the market. In other words, you’re waiting for the right time so you can pay the lowest price on your investment. If you wait to pay the lowest price, you’ll gain the highest amount of appreciation. But is there such a thing as the best time to invest?

Best time to invest in the stock market

When it comes to investing in stocks, there is no such thing as the right time. Even experts don’t know the exact day, time, and year to invest. If you wait to invest or are trading too often, you’re actually losing. Since the stock market has ups and downs, investing in the market is all about the time spent in the market, not choosing the right time.

If you’re in good financial health and have extra cash on hand that’s sitting in the bank, start investing and invest regularly. The longer you’re in the market, the more your investments will grow. If you don’t know what to invest in or aren’t comfortable investing, start investing in a sector funds/ETFs or in the S&P 500 index. Remember not to invest more than you are willing to risk.

Best time to invest in real estate

Why should you invest in real estate when stocks can provide high returns? Real estate offers more stability than the stock market.

When it comes to investing in real estate, timing plays a more important role.

There are 4 time-related factors you need to consider before investing in real estate:

1. Financial health

Similar to stocks, you’ll want to make sure you’re in good financial health before investing. Make sure your debts are in control and you are not taking on more debt to finance a down payment. Additionally, you’ll want to wait to have the cash available to pay for a down payment. Being in good financial health will get your mortgage approved.

2. Buyer vs. sellers market

You’ll want to know the historic market trends of the city or neighbourhood you plan on buying in. In particular, you’ll want to know if it’s a buyer’s or a seller’s market.

In a buyers market, there’s more supply and less demand. This means the buyer has the power to negotiate better deals.

In a seller’s market, there’s more demand and less supply. This means the seller has the power to negotiate deals. To determine a buyer’s or seller’s market, you can look at “days on market” and trends in home sale prices. A low days-on-market rate indicates a seller’s market. A high rate indicates a buyer’s market.

An increase in home sale prices means it is a seller’s market whereas a decrease shows it’s a buyer’s market.

3. Time of year

You’ll generally find lower housing prices in the winter compared to the summer months.

Because of the holidays, there are fewer interested buyers in the winter, giving you an advantage in negotiating the price.

The second best time of the year is the spring, when there is an increase in the number of available properties. If you start early with your mortgage pre-approval,  you have a higher chance of securing a good deal faster.

4. External factors out of your control

Global events like a pandemic or the 2008 global financial crisis can affect real estate.

If you’re looking to buy a rental property, these events might impact your ability to find tenants and their ability to pay rent. Consider the risks of investing in a rental property during these times and purchase rental insurance.

While investing in the stock market can be risky and real estate can be a lot of upkeep, BuyProperly mixes the best of both markets. BuyProperly is a fractional real estate company that allows anyone to invest in real estate with just $500.

This innovative solution is like investing in stocks without the management that goes into real estate ownership. Ready to start investing? Head over to their website to start investing in BuyProperly.

Why Invest in Real Estate: 7 Key Benefits to Know

Why Invest in Real Estate: 7 Key Benefits to Know

Investing in real estate can be an incredibly rewarding and lucrative endeavour, but if you’re like a lot of new investors, you may be wondering why you should be investing in real estate and what benefits it brings over other investment opportunities.

In addition to all the amazing benefits that come along with investing in real estate, there are some drawbacks you need to consider as well.

We’re going to cover the 7 top reasons why you should be investing in real estate (and a few reasons you may not want to jump in right away!)

Opportunity for Cash Flow 

Purchasing real estate to rent out for additional cash flow is becoming a very popular investment strategy, and it’s easy to see why.

Not only do rental properties give you the opportunity to generate additional cash flow month-over-month, but they allow you to build up a portfolio of long-term, stable assets and benefit from all that appreciation over the life of your investments.

There’s another big advantage to cash flow: it provides an opportunity for new real estate investors to “house hack”.

It’s no secret that real estate prices are going up and pushing a lot of new investors out of the market. When you decide to purchase a rental property, you can use the cash flow to fund your living expenses and pay your mortgage down faster to continue investing in more real estate!

Many newbie investors buy duplexes or houses with additional dwellings to make extra cash to fund their real estate business.

If you’re looking for a way to buy into the real estate market without having to spend hundreds of thousands of dollars, check out the properties at BuyProperly. They use a fractional ownership model that allows investors to start with as little as $2,500.

High Return on Investment

Another major benefit of real estate investing is the ability to make a high return from buying, renovating, and reselling (a.k.a. house flipping).

Although this requires significantly more upfront cash than rental properties, there’s huge potential for profit if you buy the right property.

Most flippers look for undervalued buildings in great neighbourhoods. These properties need work (and money!) to get them up to average market value, but, once renovated, the returns from these resales can happen relatively quickly.

Appreciation 

The wonderful thing about investing in real estate is that the value of the property is expected to appreciate. The principal amount that you invested in the property will grow over time and should be worth more than what you paid for it when you purchased it.

Real estate is a fantastic long-term investment because it’s almost always guaranteed to appreciate in value.

Investors patient enough to buy and hold their properties will benefit from predictable appreciation year-over-year. Depending on where you buy, you can expect annual appreciation rates anywhere from 2-8%.

In Canada, there’s been an average of 6.11% annual appreciation over the last 15 years.

Tax Benefits

Another major advantage of investing in real estate is all the tax benefits you’re eligible to take advantage of!

Many investors can write off costs associated with depreciation, mortgage interest, operating costs, repairs, and property tax. These incredible tax benefits are a fantastic way for investors to save and build wealth.

For example, if you are charging $2,000 rent per month and you incurred $1,500 in tax-deductible expenses per month, you will only be paying tax on that $500 profit per month.  That’s a large difference from paying taxes on $2,000 per month.

The profit that you make on your rental unit for the year is considered rental income and will be taxed accordingly.

It is vital that you keep good accounting records on your investment property. If you are claiming maintenance and repairs, for example, be sure to keep those receipts as proof. If you are to be audited by the government and can’t supply the proof of expenses in form of official receipts, chances are you will be disqualified from claiming those tax deductions.

The appreciation of the property will be assessed when you dispose of the property and capital tax will come into play.

You will be taxed on the capital gains that you earned on the property from when you invested and purchased the property to the day you sold it.  The difference between the sale price and the price you paid to purchase will be the capital gain, which will be taxed, but only in the year that you dispose of the property.

Low Volatility

Real estate isn’t subject to the same volatility as other kinds of investments. Unlike stock trading, the real estate market isn’t like to have the same massive overnight shifts.

For this reason, it’s an option for people who want something more stable and predictable. It’s a great addition to a more risk-averse portfolio, making it an all-around fantastic investment.

It’s important to note that real estate investment doesn’t come without risk. The US housing market crash of 2008 showed investors the importance of not over-leveraging and making smart investment decisions when growing their portfolios.

Leverage Your Investment

One of the most appealing aspects of real estate investment is the ability to leverage your assets. In a nutshell, leverage refers to “the use of debt (borrowed funds) to amplify returns from an investment or project”.

This means you can put 20%, 10%, or even 5% down and control an asset worth significantly more than that.

It also means you have the ability to borrow against your assets to continue investing. This creates a snowball effect and, when done effectively, can skyrocket the value of your investment portfolio.

Passive Income

This last point ties into the other benefits we’ve mentioned above. Rental income aside, real estate accumulates passive wealth through its inherent tax benefits and long-term appreciation.

In addition, the rental income you collect can be done with minimal involvement and effort. With the right property managers and rental team, the ROI on your investment becomes relatively passive.

At BuyProperly, they help investors start with as little as $2,500 and see projected annual (passive) returns of 10-40%! Find out how.

What are the cons of investing in real estate?

Real estate is a fantastic investment to add to your portfolio, but it doesn’t come without risk. Here are a few things all new investors should consider before jumping in.

Upfront costs

It’s no secret that investing in real estate the traditional way takes a substantial amount of money. If you’re buying a property to live in, expect a minimum of 5% down plus closing costs. Most investment properties and second homes may even require a 20% down payment to buy.

Real estate isn’t cheap, and it’s important for new investors to be prepared for the costs.

At BuyProperly, they leverage a fractional ownership model to allow investors to buy real estate for as little as $500. This means they can get started quickly without having to wait and save up huge lump sum deposits for investment properties.

Sourcing deals

In addition to financial costs, investing in real estate comes with a significant time cost when you take into account sourcing property deals

Unlike buying and trading stocks which can be done with the click of a mouse, property investment often requires more time, research, and preparation.

Not only do you need to find great deals, but you need to analyze them and gather the necessary paperwork to get the deal done. On top of this, if you don’t have a good team in place, managing your repairs, maintenance, and tenants can turn into an overwhelming process.

Fortunately, sourcing great deals doesn’t have to be complicated. At BuyProperly, for example, they’ve created an AI-powered platform that allows investors to view, buy, and sell real estate digitally (much like they would trade stocks).

Difficult to unload

As much as we love real estate for its security and predictable returns, it’s not the type of investment that can be bought and sold quickly. In fact, the highest returns are earned when investors are willing to buy and hold.

If you think you may need to free up cash quickly, or if you’re looking for an exceptionally quick profit, real estate may not be your main investment vehicle.

Conclusion

Investing in real estate has several major advantages. In addition to cash flow potential, you can also take advantage of steady appreciation, reduced volatility, and investor tax benefits.

It’s important to remember that real estate is a fantastic long-term investment, and not well suited to people who want instant returns. It’s a reliable, predictable asset with great cash flow and ROI potential.

Real estate is a great addition to any investor’s portfolio.

Interested in learning how you can get started in real estate investing for as little as $500? Learn more at www.buyproperly.ca

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