Investment and Wealth Basics: Real Estate edition

Congratulations! If you’re reading this, chances are, you are currently saving enough money to start thinking about investments that work for you. Putting your money in the right place can help you get everything you’ve ever wanted: A beautiful house, early retirement, complete financial security for your family, and much more. You can either save your money or invest it in assets that you think will generate great returns. The latter, of course, is subject to several market risks but is saving as safe as it looks? Not quite. Dormant cash is prone to risks and it is nearly impossible for it to generate wealth. In the long run, the little interest that it could generate sitting in your bank account can cost you more money than it makes.

Why invest at all?

If the only way you can expect to earn from your savings is by putting them in a bank account -then we are happy that you are reading this. Let’s say you put $10,000 in a bank account that offers an annual interest of 3%(if at all!). By the end of the first year, you can expect to have $10,300. However, as per the current inflation rate (3.7%), something priced at $10,000 right today would cost $10,370 in a year, this means that you essentially earned $300 on your savings but still lost on purchasing power. This simple comparison highlights an extremely important relationship between inflation rates and interest rates offered by banks.

Inflation eating into important savings like pension/retirement funds, college funds, emergency healthcare funds, etc., is a common occurrence. Before you realize it, you end up with less buying power than what you started with, thereby putting your financial future in jeopardy. However, Good investments ensure financial security through wealth creation, which in turn gives you the freedom to live your life to the fullest.

Investing in Canada 

Simply put, Canada’s proximity to the U.S and numerous free trade agreements give Canada substantial power in world trade. Some of the largest Fortune 500 companies based out of the U.S (and even Europe, in some cases) have been choosing Canadian cities as ground zero for establishing their R&D hubs. With industry and immigration both converging, it is no wonder that real estate has seen unprecedented growth over the past few years. 

As for the Canadian economy, it is expected to fully recover from the Covid slump within the next few months. The Government’s decision to lower the threshold for Foreign Direct Investments in 2021 has also massively helped this recovery. With a rock-solid economy and booming real estate market, Canada currently presents an incredible market opportunity for young investors. 

Canada Investment Options 

1. Buying a house

In a booming economy, real estate is an incredibly fruitful asset in terms of long-term investments and rent is one of the oldest, most trusted methods of generating passive income. Even if you aren’t looking for a rental property for investment, you can always look for a second home that would appreciate in value over time.  Almost every Real Estate option turns out to be a great asset if the neighbourhood and setting are correct.

2. REITs

REITs or Real Estate Investment Trusts are also a great option to explore as they allow you to invest in real estate without having to purchase different plots/houses. REITs are generally considered to be low-risk, high-yield investment options but these are long-term investment options. Any money you put in a REIT would have to be money you’re okay with not seeing for at least the next five years.  Another major drawback is that REITs give you no power to choose where you would like to invest – this lack of transparency is a major drawback.  The different types of REITs you can invest in are :

  • Equity REITs: These are funds that own and manage income-producing real estate. A part of the profits is naturally funneled back to the shareholders, who are free to cash out or reinvest it. Contrary to popular belief, equity REITs make most of their money through rent and not reselling acquired properties. 
  • Mortgage REITs: As the name suggests, mortgage REITs lend money to real estate stakeholders directly (through loans) or indirectly by investing in mortgage-backed securities. (If that term sounds familiar, it’s because you have most probably come across it before while reading about the USA’s 2008 housing crisis!). These REITs mostly earn through net interest margin on hundreds of loans, which means they’re directly dependent on interest rates. 
  • Hybrid REITs: These REITs (usually the largest) are simply funds that use both equity and mortgage-backed methods to make money. Hybrid REITs are considered to be the safest because of their diversified nature. 

Investing as a beginner 

As a beginner, it can be challenging to navigate the complex world of real estate investment. The legal and technical jargon attached to most Real Estate investment options discourages investors from exploring them. Further, it takes up a sizable amount of your time and money to regularly manage these investments. But there‌ ‌is a better‌ ‌way‌ ‌to‌ ‌invest‌ ‌in‌ ‌property‌ ‌without‌ ‌taking‌ ‌out‌ ‌a‌ ‌huge‌ ‌mortgage‌ ‌fee‌, ‌paying‌ ‌a‌ ‌fee‌ ‌to‌ ‌the‌ ‌realtor or locking it away in a REIT.‌ ‌ With Fractional Real Estate Investing you are on your way to saving enough for buying your own home sooner than you thought and that too with no entry barrier and no hassle of maintenance or tenants – that is what BuyProperly does!

Fractional Real Estate Investment

BuyProperly provides the benefits of real estate investments’ high returns for everyday investors, without any barriers, pre-approval or hassle. We turn high-yield real estate into easy-to-invest opportunities, giving you the chance to grow your wealth in a quick and easy manner.

Unlike the traditional model of real estate investment, with BuyProperly you know that you are owning a slice of a high-yield property as our proprietary AI analyzes hundreds of factors and evaluates over 500 million data points to identify trends and uncover high-value deals to generate the highest returns for you. Also, we purchase and manage the real estate assets for you so you enjoy being a landlord without the usual headaches that tenants and maintenance bring. We also help eliminate the hassle that landlords often face in managing a property.  Contact us at [email protected] to know more about our best-in-class platform.