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Mortgage-Matters

Investing in real estate

Buying and investing in real estate has always been attractive for those looking to generate additional income and benefit from the wealth created with increases in property values over time.

Is investing in real estate right for you?

The Attraction

Diversification is key to anyone’s investment portfolio whether you are talking about mutual funds, TFSAs, stocks, bonds, RESPs, RRSPs, etc.

Diversification helps balance risk and provides a level of confidence that your investments are still going to be there when you are ready to liquidate them, such as at retirement, etc.

Some would consider adding real estate, other than their principal home, to their portfolio to ensure full diversification.

A real-estate investor can still use a relatively small amount of down payment or capital to purchase a property, and this can provide an attractive return on investment (or ROI). This return is generated from a combination of monthly income and property value increases.

The monthly income is generated by taking the rent collected from tenant and then deducting all the expenses. To ensure that there is a positive cash flow, smart real estate investors work with a mortgage broker and REALTOR® that can assist with the analysis.

Equity is built in the property by way of appreciation of value over time as well as with each mortgage payment.

With mortgage interest rates at record lows and an abundance of potential tenants in many areas, there is a high demand for real-estate investors to take the plunge.

Here’s another way to look at it as well. Real estate investment is also beneficial for those who have a hard time saving money, as it can act as a sort of forced savings account.

Essentially, as you pay down the principal of a mortgage, you're reducing debt and building equity. Then, when you go to sell the property, the money you receive back from the sale is considered your forced savings.

So What is the Risk?

Like any investment, there is risk and it is possible to lose money in real estate, albeit relatively low.

Real estate has shown to appreciate steadily over the long term, and has for the past 25 years, so the chances of someone losing money on a purchase are pretty slim.

However, keep in mind that doing your due diligence before an actual purchase is key.

You must take into consideration certain factors when choosing a property, such as:

  • desirability of location
  • stability of the market in that area.

Financing Options and How do I get started?

One more attraction is the fact that it really only requires part of your time, is flexible, and the skills can be learned.

The process is relatively easy, and I’ll walk you through that step by step. The first step is to build your Real Estate Investment Plan, which would include talking about your acquisition and exit strategies.

Call me for more information on how to see if you are ready to purchase a rental property and build your investment plan.



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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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