Getting started in real estate investment can feel daunting for a newcomer. Not only is there a lot to learn about the practical aspects of investment, but investors also feel pressure to perfect both their instincts and their timing. Before making any major moves, use the following guide to learn the principles behind buying property and how they can be used to an investor's advantage.
The Human Touch
It's easy to think of Britannia real estate investment as a sheer numbers game. All investors need to do is add up property taxes, maintenance costs, and interest fees before deciding if the property is right for them. But real estate is also about emotions, feelings and how the investor feels about the property. Even commercial property is rooted in the entrepreneur's feelings for commercial properties; how they look and are maintained, the retail or office establishments within the commercial building and how the building looks to the public.
Understanding the Terms
Knowing the terms in real estate make it easier for investors to absorb the short-hand that is inevitable in their industry:
- Residential real estate: This term doesn't only refer to single-family homes, but also townhomes, condos, duplexes, and even apartment complexes.
- Co-op: This property is technically owned by a corporation rather than an individual investor. People who want a portion of the land or structure will buy shares in the corporation rather than the physical property.
- Strata: This term refers to condominium or apartment properties that allow renters to buy a full unit as well as a fraction of the common areas. Strata properties don't exist in every province, so investors will need to research if this is even an option.
How to Invest in Rentals
The rules of every rental property will differ based on the province in which it's located. Whether the investor wants to offer short-term or long-term rental agreements, they'll need to know the specific rules of their province first. Because of websites like Airbnb, many neighborhood rules have been changed for short-term rental agreements, making it more restrictive for investors to make money from temporary renters. There are also rules based on which property an investor chooses. For example, not all co-ops will even allow owners to rent out the units. If they do allow this, they'll typically have far stricter rules than a more traditional property.
How to Make Money Flipping
Flipping can be tailored to either residential or commercial property, so long as the investor know how to turn a property around as quickly as possible. It takes a lot of time and money to flip a home, and investors need to be involved at every stage of the way. If they're planning to do the construction themselves, they'll need to get the permits needed (according to their province laws). If they're hiring a professional crew, they'll need to supervise the building's progress. They'll also need to know which renovations are likely to spark the best returns before moving forward.
The Ease and Convenience of a REIT
A Real Estate Investment Trust or REIT is designed to give investors a chance to invest in property without having to worry about the more formal aspects of ownership. Instead of buying a property outright, they'll give their money to a single organization. This organization will collect money from other investors to buy and manage properties around the country. Because investors aren't expected to do any of the building management, their profits won't be as high as they would be if they were the single owners. However, the risks are lower because the money is spread out across multiple properties (similar to a mutual fund).
The Perks of Holding Vacant Land
Some investors will choose to buy vacant land so they can sell it back to an anxious developer later on. This option can be extremely profitable, but it can also be one of the riskier ventures for an investor to make. It's not always clear exactly how long it will be before the land will appreciate in value—and property taxes can eat into profits quickly. In addition, zoning laws may prohibit certain developers from wanting the land. Plus, these laws can change at any time. So even if the investor confirms that their vacant land is viable for commercial or residential real estate, they can't guarantee this by the time they sell.
Few people can jump into investing without the right preparation. These tips can make it easier for investors to map out their priorities, so they can pick the opportunity that works best for their budget, lifestyle, and portfolio.