Should I Invest in Real Estate?

Should I Invest in Real Estate?

Can Anything Outperform Real Estate Investment?

Millions of investors across the US and Canada, including people with jobs to rich CEO’s in big corporations are wondering the same thing: “Should I invest in real estate right now?”  There’s certainly a frenzy about real estate right now, and while you could invest conservatively in REITs, real estate mutual funds, home builders, and real estate brokers, the real profit and risk is in buying real property. Risk = Opportunity.

Going it Alone Might be Risky Though

A new online service called GoCO for instance caters to buyers who might want to combine their buying power with other investors in order to buy property in the Toronto market. The owner Lesli Gaynor, a Realtor with Royal Lepage came up with the real estate speed dating business idea after seeing people get shut out of the real estate market for a variety of reasons.

One of the key reasons people get shout out of buying real property is due to a lack of funds.  Yet the allure of rental income is too strong to resist. Many will try to find any way possible. And GoCo might be the best way to go about making it happen. Although you’ll read the risks here, there’s also safety in numbers.

Of course, co-ownership of property comes with risks and potential conflicts, legal, financial, and personal. However GoCo arranges meetings between potential investors to allow them to select investing partners they can trust and work with. Since risk is clearly the biggest problem, GoCo is making is helping their clients find co-investors, thus facilitating the selection process somewhat.

It’s a very cool idea that’s sure to catch on beyond the Toronto housing market and perhaps into the New York housing market, San Francisco housing market, Los Angeles housing market, and perhaps globally to London, Hong Kong, and into China.

Those are good tips and advice but it doesn’t help you make the decision to invest $10,000 to $100,000 in real estate, or to buy a property for either rental income or for capital gains on a home. And Toronto isn’t the only place you can invest. There big opportunities for income growth in US Cities and Vancouver has a severe shortage of rental properties at reasonable prices too.

Most real estate investors are likely drawn by the superior returns possible with real property. And when you consider that you own the property yourself, quite a few of the risks disappear. You can live in your investment and write off renovations.  What other investment type gives you these money saving advantages?

And while the Toronto housing market might be on the brink of a downslide, the Toronto market is characterized by a severe shortage. It’s a shortage NYC residents have lived with for many decades, but for Toronto it’s new. The persistent NYC situation though indicates that housing shortages can last forever if there’s no political will to solve them. And prices stay high right through recessions.

Even if a Toronto housing bubble bursts, people will still need a place to live. Millennials especially need homes for them and their newly forming families. Certain districts in Toronto have big pools of millennials buyers and there presence ensures continuous demand and rental prices for the foreseeable future. I pointed out the benefits of real estate investing in another post. They are compelling.

But Should I Buy a Home in Toronto?

The price charts show home prices don’t fall much in Toronto, Mississauga, and they’re still rising in Vaughan, York Region, Oakville and Milton. Even during the last Ontario economic collapse in the 90’s, home prices came back soon enough. You’ve got short term issues such as the bubble, and long term issues such as how long with this economic growth continue?  In Toronto, long term is about as secure as it gets.

Rental properties have high earning potential in the GTA due to government enforced land restrictions. This is what has forced up home prices in the GTA and why most homes now are million dollar homes. With big migration into Toronto, there is plenty of demand from these newcomers who bring their families to be educated here. The foreign buyers tax will probably be cancelled once the new Ontario government comes in (Wynne has a 14% approval rate).

What are the Risks in Buying Real Estate Right Now?

  • Ontario economic downturn
  • Canadian economic downturn
  • US economic trouble
  • further government meddling with rent controls and higher realty taxes
  • unforeseen renovation costs to make unit rentable
  • local zoning bylaw changes
  • mortgage rates rise a couple of points
  • your own personal employment and financial situation

6 Mistakes You Might Make in Real Estate Investing

  1. not seeing further rent controls and taxes to be applied on property
  2. not doing enough research on the neighbourhood and what might be going on or is planned for the future
  3. getting bad mortgage financing
  4. doing everything on your own – renovations, marketing, real estate sales, finding renters
  5. being desperate and impulsive and not negotiating the very best purchase price
  6. underestimating costs, taxes, expenses

When you have money, a lot of people have ways of extracting it from you. You really need good advice from an advisor or realtor who has experience.

So if the macroeconomic and local economic pictures are bright, all you need to do is find a good property. And if you lack the funds, you need to find investment partners. Perhaps GoCo can help you? Then you’re ready to work with a good Realtor to find the right property with the best investment return.


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