10 Reasons to Invest in Real Estate
At Strategic Investment Realty, we truly believe investing in real estate is the best way to earn a passive income, save for retirement, and build a diversified investment portfolio. In our experience, real estate investing is the best form of investment because you get to use other people’s money (a renter or tenant) to pay off your initial investment while simultaneously increasing your monthly cash flow. Sounds great, right?
If you’re wondering if investing in real estate or purchasing a multifamily real estate investment property is right for you, we’ve compiled the top ten reasons why investing in real estate through Strategic Investment Realty is a turnkey solution to your investment strategy.
1. Earn Passive Income For Life
The number one reason to invest in real estate is to generate a passive income for yourself so you can enjoy more of the things you want. However, not all real estate investments are created equal. Maybe you are hesitant to invest in real estate because you’re not looking for another full-time or part-time obligation. Maybe the thought of owning and maintaining an investment property on the other side of the country sounds daunting and difficult to do with your already busy schedule.
This is why Strategic Investment Realty has made the process easy for employees and hard-working professionals who already have a full plate. We make the investing process seamless and simple by choosing only the best revenue-producing properties in Canada and the United States. Our unique approach to real estate investing enables you to invest your hard-earned money in real estate markets that have seen continuous and stable growth, thereby giving you continuous passive income for life.
2. Diversification Leads to Increased Stability
Many investors strive to reduce the overall risk of their portfolio through allocating funds to various types of assets and securities. A good investment advisor will tell you the fundamental component of investment risk reduction is asset class diversification (or put more simply, not putting all your eggs in one basket). This variation of assets helps to ensure that a portion of your investment portfolio is performing well at all times, increasing the overall value of your portfolio at any given point in a fluctuating economic cycle.
Adding investment real estate to your portfolio will help offset the volatility of other high-risk assets, thereby reducing the overall risk level of your portfolio, and providing you with steadier returns.
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The Economic Cycle & Regional Diversification
A key part of our due diligence process involves analyzing where a region falls within the typical economic cycle. When your investment properties are located in multiple regions across Canada and the United States, you are maximizing your exposure to various economic cycles. This lets you more effectively capitalize on the benefits of market timing when you decide to sell a property.
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The ongoing performance of your real estate investments can also be strengthened by choosing properties in geographic areas with varying economic conditions. At Strategic Investment Realty, we do thorough market research and analysis of economic trends, so you don’t have to. We only partner with building developers that meet our stringent criteria and build multifamily housing units in areas of continued growth and stability. By working with Strategic Investment Realty to diversify your investment portfolio, over time your portfolio will be made up of real estate investment properties spread out over various regions, giving you additional diversification for increased stability.
3. Use Market Cycles to Your Advantage
Effective market timing (buy low/sell high) is a crucial component of successful real estate investing. While it is difficult to time when a market has reached the bottom of the real estate cycle, noting an upward trend and taking action (even if it means paying slightly more than you would at the bottom of the cycle) can translate into strong future returns.
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Real estate market timing is not an exact science, however there are several key indicators we use to determine where a market is in its lifecycle. A number of factors, including seller motivation, supply and demand, interest rates, employment trends and population growth can all have significant effects on market timing.
Developing a solid understanding of the real estate cycle, performing substantial market area research, and having the fortitude to get into the market can be difficult for the individual. However, when you work with Strategic Investment Realty, you are backed by a team of industry experts committed to your investing success.
4. Use Leverage to Maximize Returns
Leveraging Your Investment Capital
When you use borrowed capital to enhance the earning potential of an investment, you are using the full power of leverage; and since real estate is a tangible or hard asset, financing is readily available. The potential return on your leveraged real estate investment is substantially increased compared to a non-leveraged investment.
Leveraging Your Mortgage Financing
You are further benefiting from leverage when the rental income generated by your investment property is used to pay down your mortgage. The rental income you earn from your property will usually be sufficient to offset your mortgage payments and all associated expenses for each unit you own.
Leveraging Your Time
When you choose to participate in the optional property management solutions offered by our associates, you are choosing to leverage your time to your best advantage. You benefit from owning a high quality investment, while the day-to-day tasks associated with managing the property are left to the professionals.
5. Tax Advantages*
Tax Deferred Growth
Similar to a Registered Retirement Savings Plan (RRSP), the value appreciation of your real estate investment is sheltered from tax until you sell the property. For instance, if you purchase an $80,000 property that increases in value to $120,000, this capital gain of $40,000 is sheltered from tax until you sell. When you own multiple properties, this benefit compounds, since there is no limit to how much growth you can shelter with real estate investments.
When you sell your Canadian investment property and thereby trigger a capital gain, you will benefit from the capital gains status of this profit. This means 50% of your capital gain is taxed at your marginal tax rate, while 50% of the gain is tax-free! This 50% tax-free profit can quickly add up when you own multiple real estate investment properties.
Real estate investing allows for several tax deductions. The cost of financing and operating your property can be deducted from the income you earn. This includes mortgage interest, property taxes, property management fees (if applicable), repairs, maintenance, and other related expenses that can be deducted from your gross rental income, thus minimizing the amount of tax you will pay.
*The specific tax benefits you will enjoy may differ from other investors, so be sure to consult your tax accountant for specific advice.
6. Increased Cash Flow
A fundamental benefit of real estate investing is its potential to generate income, especially over the long-term as your mortgage is paid down. The income generated from your investment property will often be sufficient to offset your mortgage payment, taxes, condominium fees and other expenses, while still providing you with increased monthly cash flow.
Your cash flow will be strengthened over time as you pay down your mortgage and funds can then be used to supplement your retirement income.
7. Real Estate is a Renewable Source of Capital
Investment real estate also provides you with a renewable source of capital through re-financing options, as property values increase and mortgage financing decreases over time. This renewability can effectively offset the potential diminishing capabilities of your RRSP.
8. Free Title Ownership
The multifamily real estate investment properties we offer are individually titled in your name, giving you complete and total control over your property. With this control comes the ability to sell, refinance, or hold the property as you see fit, while giving you the security of hard asset ownership.
9. Wealth Creation
Over time, strategically selected real estate investments can be powerful vehicles for wealth creation. The value of your investment property increases, while the corresponding mortgage financing is reduced nominally through regular mortgage payments. The result is increased equity and increased wealth.
The equation is quite simple:
Mortgage Financing Reduction + Property Value Appreciation = Long Term Wealth Creation
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10. Inflation Hedge
A long-term real estate investing strategy is an effective hedge against inflation because the value of this asset class has historically increased at a rate similar to the rate of inflation. You are thereby ensuring that your “real” or hard asset will help maintain your wealth and your standard of living.
Investing In Real Estate with Strategic Investment Realty
Consider that these are our top ten reasons to invest in real estate. Want to hear about the several other benefits we’ve found from our years of real estate investing experience? Contact us today to learn how our real estate investment advisors can create a customized strategic real estate investment plan for you that will give you the time and freedom to enjoy the many benefits of real estate investing.