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.
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%.
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.
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
The Pros and Cons of Investing in Single-Family Homes
There is no doubt that investing in real estate is a smart move for anyone looking to secure their financial future. But when it comes to building a lucrative real estate portfolio, there are a few different options to choose from.
One of the most popular choices is investing in single-family homes. In this article, we will take a look at the pros and cons of investing in single-family homes to help you decide if this is the right type of investment for you.
First, let’s define the main types of residential investments:
Single-family: A property that has one available dwelling to rent.
Duplex: A property that has two available dwellings to rent.
Multi-family: A property that has three or more available dwellings to rent.
Let’s start by looking at all the pros of investing in single-family homes.
High Returns
Single-family homes are a great choice if you’re looking for steady appreciation with a good return on investment.
In most cases, you can expect to make around 12% on your investment each year. Don’t forget, you’ll have maintenance and operating expenses and potentially regular mortgage payments as well, which we’ll discuss in a moment.
That’s a pretty good chunk of change. And remember, investing in real estate isn’t just about getting rich quick — it’s about investing for the future.
If you plan on holding on to these properties indefinitely, then single-family homes are a great choice because they tend to appreciate quickly over time.
For instance, if you buy a property today for $100,000 and sell it 20 years from now for $200,000 then that’s an average of 12% appreciation per year.
If you held on to your investment property indefinitely, the value would continue to increase at this rate while other investment options (like stocks) might plateau.
Easier to Get Started
Another pro of investing in single-family homes is that it is a very easy way to get started. Unlike multi-family homes that may require hundreds of thousands of dollars to buy, single family homes are less expensive and therefore easier to acquire.
You don’t need a lot of money to start building your real estate portfolio and you can begin to see returns pretty quickly.
But perhaps you don’t have enough for the mortgage down payment. If that’s the case, then you could consider the opportunity to invest in a fractional share of a property. At BuyProperly, they help investors like you get started in real estate investing for as little as $2,500. Learn more here.
Stable and Secure
The market for single-family homes is always growing. Even if the economy takes a turn for the worse, you can still expect to make money off of your investment. Unlike investing in stocks or other forms of investments, real estate is something that normally retains its value no matter what the market is doing.
Maintenance and Repair Costs
A big benefit of single-family investing is that repair and maintenance costs are often lower than what you would pay with larger buildings.
Instead of having multiple units to look after, investing in single-family homes means you only have one unit to worry about. Plus, you can often do the repairs yourself to save even more money.
More Control
Investing in single-family homes gives you more control over your investments.
For example, if you buy a single-family home and then decide that investing isn’t right for you anymore, you can sell it at any time. You have more control over the investment and how long to continue investing. Plus, since they appreciate quickly over time with little upkeep required from an investor point of view, this means less stress when investing.
Less Risk
Single-family homes are a great way to get started in real estate investing without taking on too much risk.
The market for single-family homes is always growing, so if your investment doesn’t go as planned, you can still sell it down the road and make most of your money back.
Easier to Manage
Another pro of investing in a single-family home is that it is much easier to manage than a larger property. It’s often easier to find a property management company and the fees are substantially less than you would pay with a larger building. You also don’t have to worry about hiring and managing staff, which can be a big hassle.
Less turnover
Single-family rentals tend to have long-term tenants with less turnover than lower-priced units in a multi-family building. Long-term tenants are more stable and will pay their rent on time, which means less stress for you.
Multiple vacancies can become an issue with larger properties and can really eat into your profits.
Diversification
Because single-family homes are less expensive than large buildings, it’s easier to continue to invest and add more homes to your real estate portfolio. That means you can diversify and reduce the risk of sudden vacancies and non-paying tenants.
As you can see, there are several pros to investing in single-family real estate. But, like any investment, it doesn’t come without some risk.
Cons of Investing in Single-Family Homes
Now that you have a good idea of the many benefits of investing in single-family homes, let’s take a look at some of the cons of this type of real estate investment.
Sourcing Deals
The main con of investing in single-family homes is that it can be difficult to find good deals. Because this is such a popular choice, the competition is fierce. So you need to be prepared to do some digging and put in some work if you want to make a profit.
Takes time to generate a return
With single family homes, it can take a while to see a return on your investment. It’s not uncommon for it to take at least five years before you start seeing any real profits.
Remember that although you’re always able to collect rental income on your investment, much of the benefit in single-family home investing comes through the capital appreciation over time.
Flip & Sell Risks
“Flipping” houses (buying and selling them quickly for a profit) can be risky. If you’re not careful, you could end up losing money on a flip.
Another con to flipping is that it’s often difficult to find good deals – the same issue we mentioned before. Plus, if the market takes a downturn, you could end up losing money on the sale.
Vacancy rates
Unlike multi-family home investing with several units to generate income, single-family home investing means you’re buying only one unit to rent. If a tenant doesn’t pay the rent or leaves the property, you could suddenly find yourself with a 100% vacancy rate, which can significantly eat into your return on investment.
Management
Another downside is that it can take a lot of time and effort to manage all of the different aspects of owning and managing multiple single-family homes. Two or three properties can be extremely easy, whereas 10, 15, or even 20 single-family homes can mean a lot of traveling for your management company!
If you are planning on managing the property yourself, you’ll also need to be within a reasonable commuting time to this property to deal with any issues.
Less Leverage
Lastly, investing in a single-family home usually doesn’t provide as much leverage as investing in a larger property.
In the real estate investing world, leverage means using other people’s money to fund your investment.
For example, with single-family investing, you may only be able to get a loan for 50% or 60% of the purchase price. Whereas with investing in a larger property, you may be able to get a loan for up to 80% or even 90%.
This is because investing in larger buildings means investing more money, and investing more money means investing more risk.
The bank doesn’t want to be stuck with all the risk if something goes wrong. So they’re more likely to loan you money when you’re investing in a larger property.
This means you can’t make as much money on your investment if it goes up in value.
Are single-family homes the right investment for you?
It all depends on your goals and what you’re looking for in an investment. If you’re prepared to do some work sourcing good deals, investing in a single-family home can be a great way to get started in real estate investing. They are stable and secure, have lower maintenance costs, and are easier to manage than larger properties.
However, keep in mind that it can take a while to see a return on your investment. So if you’re looking for something that will generate income quickly, single-family homes may not be the best option for you.
Conclusion
Overall, investing in single-family homes is a great way to secure your financial future. It is a stable investment that has the potential to make you a lot of money over time. However, it is important to remember that there are some risks involved, and it does take some effort to manage everything.
If you are willing to take on these challenges, then investing in single-family homes is definitely something you should consider.
Looking for your first (or next) real estate investment? At BuyProperly, they use advanced AI technology to help match investors with lucrative investment opportunities. They use a fractional ownership model so you can get started for as little as $2,500 (and see projected annual returns of 10-40%). With this approach, BuyProperly makes it easy to invest in multiple properties and locations to diversify your investment portfolio and build your wealth! Want to learn more? Visit BuyProperly.
How to Calculate ROI in Real Estate to Maximize Your Profit
If you’ve dabbled in real estate investing (or even if you’re brand new) you’ve undoubtedly heard of “Return On Investment” (ROI) and how important it is to consider when making your investment decisions.
But what exactly is it, and how do you calculate ROI in real estate? Is it crucial for investment success?
We’re going to break down the basics of ROI, how to calculate it, and how to use it to make smart investment decisions so you can grow your real estate portfolio with confidence.
Ready? Let’s dive in!
What is ROI?
Because ROI stands for “return on investment,” it’s a very important concept to understand when it comes to real estate investing.
It is a standard metric used to calculate the profitability of an investment on a case-by-case basis. It measures the financial return of a particular investment relative to its cost. The higher the ROI, the more profitable the investment and (presumably) the better it is.
Why is ROI so popular for measuring profitability?
Two reasons: first, it’s incredibly simple to understand and easy to calculate the ROI on almost any investment.
Second, it provides a simple way to get a financial snapshot of an investment, relative to other investments, so you know when to buy, sell, or simply measure whether or not your portfolio is on the right track.
Although it’s incredibly important to know the ROI of any investment, it often doesn’t take into account the complexities, nuances, and “life factors” involved in growing a successful real estate portfolio. For this reason, it should be used as a tool to give broad feedback on the quality of your investments.
Why is ROI in real estate so important?
Although many ROI formulas paint a simplistic picture of investing, they can also give a very quick and solid overview of a property’s profitability.
In a pinch, you can figure out the “health score” of any potential investment you’re interested in and ditch some of the lemons along the way. Properties with an obvious cash flow issue or negative ROI can be identified quickly.
When taken into account along with your overall investment goals, using ROI calculations will help you make smart financial decisions and build a solid real estate portfolio.
At BuyProperly, an online marketplace for fractional real estate investments, they calculate ROI for investors and use it as a benchmark to measure the profitability of their properties. Most of their investors can expect to see projected annual returns of 10-40% Take a look at their properties.
The formula for calculating ROI
There are a few different ways to calculate ROI depending on the type of real estate investment you have. Let’s look at how to calculate ROI for real estate investments that are resales or rental investments.
Here are some examples:
Resales
When calculating the profitability of resale real estate investments, use this simple formula:
Your equity in the property (total gains minus your total costs) divided by total costs
There are two methods real estate investors can use to calculate their gains and costs:
the Cost Method
the Out-of-Pock Method
Let’s look at them both in detail.
1. The Cost Method
This method for calculating ROI uses the total equity in a property divided by that property’s costs (renovations, repairs, and sale price). The Cost Method works for properties purchased with cash and/or financing.
For example, say you purchase a home for $250,000. After putting in an additional $100,000 for repairs, you sell the property for $500,000.
First, you need to calculate your equity in the property. If it sold for $500,000 after your total costs were $350,000 for the purchase and repairs, you had $150,000 left of equity.
Next, calculate the total costs. As mentioned above, the total costs for the property were $350,000 ($250,000 purchase price plus $100,000 in repairs).
After you divide your equity ($150,000) by the total costs ($350,000), you get 0.43, which is a 43% ROI.
2. The Out of Pocket Method
The second popular method for calculating ROI looks at only what you’ve spent out-of-pocket for property costs and expenses and doesn’t take into account the property financing.
When would investors use this method? The Out of Pocket Method can be used to calculate ROI only when investors purchase a property with a mortgage. Both the down payment and financing on the property are calculated as equity, making the overall ROI higher.
Let’s use the same example as above.
You purchased the property for $250,000 and put in $100,000 of repairs, only this time, let’s say you put a 20% down payment on the house and used a traditional mortgage to finance the rest.
This means your out-of-pocket expenses are only $50,000 (your down payment) plus $100,000 (repair costs).
If the property is worth $500,000 after repairs, this means you have $350,000 of equity (including your bank financing as leverage). After you divide $350,000 by the total sale price ($500,000), you’re left with an ROI of 70%.
Rental properties
Calculating ROI on rental properties is slightly more complex since we need to factor in year-over-year profitability.
For this ROI, we use the following formula:
Net operating income (annual rental income – operating expenses) divided by the total out-of-pocket expenses.
Using the example from above, if you purchased your property for $250,000 with a 20% down payment, that means your out-of-pocket expenses would be $50,000. Add in closing costs ($5,000) and some money you spent on repairs ($20,000) your total expenses are $75,000.
Now, let’s say your monthly rent is $1,200. Multiply this by 12 to get the average yearly rent. Subtract operating expenses (let’s assume these are $500 a month). This leaves you with a yearly net operating income of $8,400.
Divide $8,400 by your out-of-pocket expenses ($75,000) and you’re left with an ROI of 11%.
Other important factors when considering ROI
When you’re trying to paint a more detailed picture of your ROI on a property, there are two other important factors to consider:
home equity
year-over-year appreciation
Using the above example, if you buy a $250,000 property with a $50,000 down payment and a $200,000 mortgage, your equity grows over time as you pay down the principal balance on your loan.
Let’s say that, according to your mortgage amortization schedule, you paid $2,300 on the principal balance of your loan in the first year. This $2,300 now becomes equity and can be used in your ROI calculation.
Furthermore, it’s important to consider year-over-year appreciation. If we assume your $250,000 property appreciates at 6% each year, then next year, your property will be worth $265,000, adding an additional $15,000 to your equity.
At BuyProperly, they calculate ROI using net cash flow, mortgage repayments, and capital appreciation to paint a more accurate picture of the returns investors will make over time.
What is a good ROI for real estate?
Determining your acceptable ROI for real estate investments depends on your personal goals and your ability to tolerate risk, which means there’s no right or wrong answer.
Investors looking to rent will normally be content with lower yearly ROI numbers knowing they plan on holding the property as a long-term investment. For rental properties, it’s common to expect a 5-10% ROI.
Property flippers, on the other hand, are more interested in the immediate ROI and are looking for a property with the potential to generate higher returns. In this case, an ROI of 20% or above is ideal.
At BuyProperly, they help real estate investors get started for as little as $2,500 and see projected annual returns of 10-40%. Want to know how? Learn more >>
Conclusion
ROI is an important consideration when investing in a property. Whether you’re looking for a quick return or long-term cash flow and appreciation, calculating ROI can help make your next investment decision easier.
Remember, since ROI is a simplistic method of sizing up your next real estate investment, it’s important to analyze it alongside your risk tolerance profile, as well as your long-term and short-term goals ,before making any investment decisions.
Looking to get started in real estate investing without feeling overwhelmed? Check out BuyProperly’s properties and see how they use a fractional ownership model to help investors build their real estate portfolios.
How to Become a Real Estate Investor: A Step-by-Step Guide
Are you wondering how to become a real estate investor and start growing your very own property portfolio? We’re diving into the nitty-gritty of what it takes to find your first property deal and build a lucrative real estate investment business.
Real estate investing is on the rise and now is a great time to get into the market. In fact, according to an article in The Globe and Mail, investors account for one-fifth of all home purchases across Canada!
If you’re brand new, investing can feel overwhelming, but there are a few simple steps you can take to set yourself up for success. With a clear plan and the right strategy, being a real estate investor is incredibly exciting, rewarding, and lucrative.
What qualifies you as a real estate investor?
The great news is that you don’t need any special credentials or qualifications to start investing in real estate. Many people choose to get their real estate license so they can get commissions on sales and find private deals, but this is absolutely not mandatory to start finding great property deals.
Even though you don’t need specialized qualifications, it’s important to educate yourself as much as possible on the world of real estate investing so you can become an expert in your field.
Is it hard to become a real estate investor?
Building a lucrative real estate portfolio isn’t incredibly difficult, but it does take time, effort, and patience. New investors should be prepared for a learning curve as they figure out how to navigate the market and build the connections that will help them succeed in the industry.
If you’re brand new to real estate, BuyProperly has opportunities for investors to jump into the property market without tons of money (or risk!).
How? Through fractional real estate investing, BuyProperly offers people the chance to own properties for as little as $2500 with a 10-40% return on investment! Want to learn more?
Now, let’s dive into the six steps you’ll need to follow to become a successful real estate investor.
Step One: Educate yourself about real estate
As a new investor, there is no shortage of concepts, terminology, tricks, and lessons to learn about real estate. The single most important thing you can do is educate yourself.
What are some ways you can learn more about real estate?
Read as many books and articles as you can on the subject
Attend local seminars and meetups to discuss real estate with investors, realtors, and brokers
Find supportive online communities. Sign up for the BuyProperly email list
Your real estate education is an ongoing process that will change and adapt as you become a more confident investor. Be open to meeting new people, making connections, and learning as much as you can!
Step Two: Get crystal clear on your goals
There are many different paths you can take as a real estate investor that depend on what short-term and long-term goals you’re trying to achieve.
The best thing you can do before getting started is to sit down and write out your 1-year, 5-year, and 10-year goals. Remember, real estate should be a long-term investment that not only generates some cash flow, but also appreciates in value the longer you hold onto it.
If you’re looking for instant returns and a quick exit strategy, real estate and rentals is probably not the best investment to start with.
Here are some questions to ask yourself:
– why do you want to become a real estate investor?
– do you want real estate to be a full-time profession or a more “passive” investment strategy?
– what financial goals are you hoping to achieve in the next 1, 5, and 10 years?
– are you prepared to adopt a “buy-and-hold” strategy with your real estate portfolio?
– are you more interested in monthly cash flow or long-term appreciation?
If you’re not in a position to put a 10% or 20% down payment on a property, consider working with partners or starting with a fractional ownership model. At BuyProperly, their investors start with as little as $2500 and see projected annual returns of 10-40%.
If you’re interested in learning more, visit www.buyproperly.ca
Step Three: Nail down a location and property market
Deciding on which location you want to target is an important part of building your real estate portfolio. Are you planning on investing in your local area or would you consider expanding your search to include neighbouring towns and cities?
When looking for areas to invest, focus on locations with job stability, nearby schools, facilities like parks and recreation centres, predictable rents, and opportunities for economic growth. Remember, you’re building up a real estate portfolio for short-term cash flow AND long-term appreciation, so make sure you choose a stable location.
If you’re willing to purchase investments outside your local area, you can often find great deals in smaller cities and various up-and-coming housing markets! At BuyProperly, they help investors across Canada find rental properties through fractional ownership. Investors can be 100% remote.
Step Four: Start building your network
Many real estate investors attribute their success (at least in part) to having an incredible network behind them.
One of the most important things you can do as a new investor is to start making connections with other investors, local realtors, lawyers, and brokers. These people know what’s going on in the housing market and they often have access to insider opportunities before the public finds out!
Not only will this allow you to take advantage of off-market deals and get a leg up on the competition, but you’ll also have the confidence and knowledge you need to make smart financial decisions. Having a great “team” by your side will make the process go more smoothly.
Step Five: Learn how to assess properties for sale
When you’re trying to figure out whether or not to purchase a property, there are many things you should keep in mind.
Here are a few examples to consider:
Income potential: What is the current rental revenue and is there an opportunity to increase that? Are there improvements that could be made to the building? Is the rent lower than the average for the area?
Expenses: What are the ongoing expenses for the property? How much is heat, water, and electricity? What will your insurance costs be? Don’t forget about potential vacancies! When analyzing property income, assume a 10% vacancy rate for the year.
Repairs: Are there any significant one-time repairs that need to be done on the property? How old is the roof and windows? What’s the age of the hot water tank and furnace? Factor in all one-time repair costs when analyzing your budget.
Management fees: How will you be structuring property management? Will you be handling it yourself or hiring a company to collect rent, find tenants, and perform routine maintenance? Factor this into your expenses.
Location: We’ve already talked about the importance of location, but it’s crucial to analyze the location for every single real estate deal you make. In some cities, adjacent neighbourhoods (and even streets) may seem similar, but they actually have significantly different average monthly rents and property appreciation.
Ask your realtor or property broker for more information on how you should analyze rental properties.
Step Six: Dive in and make a deal
It’s true what they say: practice makes perfect. No amount of books or real estate seminars can replace the knowledge you’ll get from jumping in and taking action.
Remember: there’s no such thing as a perfect property. Being a real estate investor means analyzing properties carefully, weighing the pros and cons, and making a decision based on your goals and investment strategy.
Don’t be afraid to get out there and start looking at properties, putting in offers, and making deals.
If you’re ready to invest in your first (or next) rental property, be sure to check out BuyProperly’s available listings here. You can get started for only $2,500.
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.
Congratulations! If you’re reading this, chances are, you are currently saving enough money to start thinking about investments that work for you. Putting your money in the right place can help you get everything you’ve ever wanted: A beautiful house, early retirement, complete financial security for your family, and much more. You can either save your money or invest it in assets that you think will generate great returns. The latter, of course, is subject to several market risks but is saving as safe as it looks? Not quite. Dormant cash is prone to risks and it is nearly impossible for it to generate wealth. In the long run, the little interest that it could generate sitting in your bank account can cost you more money than it makes.
Why invest at all?
If the only way you can expect to earn from your savings is by putting them in a bank account -then we are happy that you are reading this. Let’s say you put $10,000 in a bank account that offers an annual interest of 3%(if at all!). By the end of the first year, you can expect to have $10,300. However, as per the current inflation rate (3.7%), something priced at $10,000 right today would cost $10,370 in a year, this means that you essentially earned $300 on your savings but still lost on purchasing power. This simple comparison highlights an extremely important relationship between inflation rates and interest rates offered by banks.
Source – Statista
Inflation eating into important savings like pension/retirement funds, college funds, emergency healthcare funds, etc., is a common occurrence. Before you realize it, you end up with less buying power than what you started with, thereby putting your financial future in jeopardy. However, Good investments ensure financial security through wealth creation, which in turn gives you the freedom to live your life to the fullest.
Investing in Canada
Simply put, Canada’s proximity to the U.S and numerous free trade agreements give Canada substantial power in world trade. Some of the largest Fortune 500 companies based out of the U.S (and even Europe, in some cases) have been choosing Canadian cities as ground zero for establishing their R&D hubs. With industry and immigration both converging, it is no wonder that real estate has seen unprecedented growth over the past few years.
As for the Canadian economy, it is expected to fully recover from the Covid slump within the next few months. The Government’s decision to lower the threshold for Foreign Direct Investments in 2021 has also massively helped this recovery. With a rock-solid economy and booming real estate market, Canada currently presents an incredible market opportunity for young investors.
Canada Investment Options
1. Buying a house
In a booming economy, real estate is an incredibly fruitful asset in terms of long-term investments and rent is one of the oldest, most trusted methods of generating passive income. Even if you aren’t looking for a rental property for investment, you can always look for a second home that would appreciate in value over time. Almost every Real Estate option turns out to be a great asset if the neighbourhood and setting are correct.
2. REITs
REITs or Real Estate Investment Trusts are also a great option to explore as they allow you to invest in real estate without having to purchase different plots/houses. REITs are generally considered to be low-risk, high-yield investment options but these are long-term investment options. Any money you put in a REIT would have to be money you’re okay with not seeing for at least the next five years. Another major drawback is that REITs give you no power to choose where you would like to invest – this lack of transparency is a major drawback. The different types of REITs you can invest in are :
Equity REITs: These are funds that own and manage income-producing real estate. A part of the profits is naturally funneled back to the shareholders, who are free to cash out or reinvest it. Contrary to popular belief, equity REITs make most of their money through rent and not reselling acquired properties.
Mortgage REITs: As the name suggests, mortgage REITs lend money to real estate stakeholders directly (through loans) or indirectly by investing in mortgage-backed securities. (If that term sounds familiar, it’s because you have most probably come across it before while reading about the USA’s 2008 housing crisis!). These REITs mostly earn through net interest margin on hundreds of loans, which means they’re directly dependent on interest rates.
Hybrid REITs: These REITs (usually the largest) are simply funds that use both equity and mortgage-backed methods to make money. Hybrid REITs are considered to be the safest because of their diversified nature.
As a beginner, it can be challenging to navigate the complex world of real estate investment. The legal and technical jargon attached to most Real Estate investment options discourages investors from exploring them. Further, it takes up a sizable amount of your time and money to regularly manage these investments. But there is a better way to invest in property without taking out a huge mortgage fee, paying a fee to the realtor or locking it away in a REIT. With Fractional Real Estate Investing you are on your way to saving enough for buying your own home sooner than you thought and that too with no entry barrier and no hassle of maintenance or tenants – that is what BuyProperly does!
Fractional Real Estate Investment
BuyProperly provides the benefits of real estate investments’ high returns for everyday investors, without any barriers, pre-approval or hassle. They turn high-yield real estate into easy-to-invest opportunities, giving you the chance to grow your wealth in a quick and easy manner.
Unlike the traditional model of real estate investment, with BuyProperly you know that you are owning a slice of a high-yield property as our proprietary AI analyzes hundreds of factors and evaluates over 500 million data points to identify trends and uncover high-value deals to generate the highest returns for you. Also, we purchase and manage the real estate assets for you so you enjoy being a landlord without the usual headaches that tenants and maintenance bring. We also help eliminate the hassle that landlords often face in managing a property. Contact info@buyproperly.com to know more about their best-in-class platform.
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