Real Estate Investment Ideas:
5 Different Ways to Invest

1.Real Estate Investment Ideas: Buy a Rental Property

This is the way most people hear about getting involved in real estate. This real estate investment ideas can include renting out many different types of properties like multi-unit, single family as well as student rental.  

Most new investors getting involved in real estate get involved this way, however many don’t realize how different buying an investment property is compared to buying a primary residence. With an investment property there is a minimum down payment of at least 20%. This cost also does not include closing costs, land transfer costs, as well as other closing costs. This can make buying an investment property a hefty primary investment. Additionally, it is important to remember that you must be able to cover mortgage payments while your property is vacant. 

However, if a property you are planning on renting out requires repairs, a great idea that a lot of investors do is live in that property for a year during the renovations and then rent it out with a higher value! This means you would only have to pay a 5% down because you would be living in the property for a minimum of one year and you will have a chance to pay off the mortgage without digging yourself a hole during construction! 

2. Real Estate Investment Ideas: Buy a pre-construction condo

Buying a pre-construction condo is a great idea for those who can afford a 20% down payment, but require a little more time to get it. When investing in a pre-construction condo, the 20% down payment is generally split up over the course of the construction of the building. This can help give you time rather than having a large lump sum. Additionally, investing in a pre-construction condo can give you the perk of designing the condo that you think would sell the best.

Some investors keep the property even after construction and rent it out, but some decide to sell when the building is ready, and if this building is in a good area during a good time in the market, chances are they can make a good profit.

3. Real Estate Investment Ideas: Flip a house

Flipping a house is always an exciting venture. It’s important to make sure that if you are planning on flipping a property that you have a good team behind you to support you through every stage of the renovations. Additionally, make sure to give yourself room with budget and timelines as there are times where renovations take longer than expected. 

Generally, a flip is a house that is bought below market value that requires a lot of renovations. It is important to remember that buying a house to flip it should not be considered an investment. This is more of an active business that requires a lot of time and energy that is generally involved with full time (if not more) work. 

If done correctly during a right time in the market, doing a flip on an investment property can be a great way to make some extra income.

4. Real Estate Investment Ideas: Rent out part of your home

Most new investors think this is a great real estate investment ideas of building some regular income on a property they are currently living in. Although in theory this is a great and logical idea, it is important to remember that the current capital gains exemption can be removed. This is more prominent in residences where the property is 50% rented or more, however it’s a good idea to proceed with caution as you want to make sure this will work in your favor! 

Additionally, it’s important to research current rent in your area. This is not just so you get a good amount of return on the space, but also for tax purposes. If you decide to rent out the space for lower than market value, it would be harder to claim the income that you make, even though you and your tenant both believe you are going through a rental agreement. 

5. Real Estate Investment Ideas: REITs

By getting involved in this type of real estate investment ideas, people are able to become effective investors without having to become a landlord or having to manage a property. A REIT (Real Estate Investment Trust), is similar to the Canadian Income Trusts, except with the main difference that REITs focus on profit generating real estate.

Before REITs, investors needed a lot of capital to be able to invest in real estate. This made it almost impossible for individuals to gain exposure in the real estate market. When REITS became popular in Canada, it made it easier for investors to get involved. REITs are similar to stocks can investors can invest in commercial or residential real estate. 

REITs need to distribute 90% of their taxable income a year to their shareholders as taxable dividends. This means that REITs actually can’t hold on to their profit. Those who hold shares in a REIT have to pay taxes on their dividends at regular rates rather than the lower qualified rate.

Investing in a REIT generally has a high income yield and is great for investors that want to get involved in real estate but do not have the capital or time that is involved in traditional real estate investing.

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