Updated: Jul 21
Sometimes it helps to take a step back and look at the big picture. Real estate investing is simple. Buy an asset, create value in the market place by renovating the apartments and creating new units and then rent them out so that other people pay for them. Some of the simplest concepts make the best businesses. Here is the kicker though. It isn't easy. Knowing what to buy and in what neighbourhood, estimating renovation costs, dealing with banks, lenders, lawyers, realtors, accountants, bookkeepers, contractors, property management companies, and potential tenants is enough to make anyone's head spin. That is why developing a trusted team is the best way to ensure success as a real estate investor.
People often talk about risks in the marketplace and how to best mitigate the downside on their investments. Real estate is one of the safest and most secure investments out there, if done properly. Another simple concept for you. When a bank lends money, they want to see it returned. Try going into a branch and asking for a $500,000 loan to invest in bank stocks or utility stocks. They'll laugh you out the door. But then ask for a $500,000 mortgage secured against real estate and suddenly you're signing papers. The banks like real estate more than they like their own stocks. That should be an eye opener. Can you lose money in real estate? Absolutely. Speculation, downturns and rising interest rates are all pitfalls that can affect your return in real estate. However, if you go into it for the long game and make sure that there is a buffer (cash flow), you won't be disappointed.
Will The Market Continue To Rise Like It Has Been?
No. I don't think even the most bullish investors out there could have foresaw the average price appreciation that happened over the last few years. We knew that real estate was a good investment, we knew the economic fundamentals were there, but I am as shocked as anyone at the increases we are seeing. Real estate is cyclical. There are ups and downs and flat periods, driven by supply, demand, interest rates, monetary policy and the larger economic picture in the area. Will the market continue to appreciate over the long term? Yes. Will we continue to see 30% YOY? Probably not. In fact, that is an unhealthy market that I don't think anyone wants to see.
Should I Wait To Buy Real Estate Given The Rising Rates?
There is a saying here that makes a lot of sense. Don't wait to buy real estate, buy real estate and wait. Another way to say it is timing the market never works out. However time in the market is where money is made. The big thing here is we don't know what the future holds. Those that thought real estate was too high in 2018 and sat on the sidelines are kicking themselves today. Even if we don't see big appreciations YOY, we can still count on cash flow, mortgage pay down and forced appreciation through strategic renovations to make a good investment better over the long run.
Where Is The Best Place To Buy?
Here is where relying on professionals can make a big difference. There are investment cases for a lot of areas across Canada. The best idea is to pick a spot where you have a team of people to support you, do your research to make sure that is is an economically sound area to invest in and go shopping! If you aren't comfortable doing this on your own, find someone who can support you through the process!
Jonathan Beam is a real estate investor in the Niagara region who is passionate about helping you achieve financial freedom through real estate. He works with new and experienced investors to formulate a plan that fits your specific situation and provides market guidance and consultation on the best places and strategies to pursue within the Niagara Region. Book a free, half hour no obligation consultation to see how he can help you to achieve your goals. His travels are available at www.realestateandrepeat.com
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