If you read our article about the scary statistics relating to retirement, then we hope you’re interested to learn more about the options available to you to secure a financially successful retirement.
Let’s explore 8 different Real Estate investments out there to narrow down your needs.
- Principal Residence Property Investment
The first, and arguably most important real estate investment is principal residence property investment.
When you buy your primary residence, you don’t just buy a place to live in- you are making a long-term investment. You are paying off your own mortgage and growing your wealth.
The Canada Revenue Agency allows homeowners a tax exemption from any profits you earn by selling a principal residence. This exemption is crucial when it comes to real estate investing in Canada. All properties that you own are subject to tax when they increase in value. This value in appreciation is called capital gains, and any asset that grows in value is subject to capital gains tax.
When you sell a property, you are liable to pay capital gains tax on half the profit you earn from selling it. If you are selling a principal property, however, the CRA provides you with a complete exemption on all capital gains tax you would otherwise owe on the transaction.
- Buy And Hold
The buy and hold method is another traditional strategy of real estate investing in Canada.
- You can purchase a single-family home and rent it out to a family.
- You can purchase a multi-family home, live in one of the units, and rent out the rest.
- Purchase a multi-family home and rent out all the units.
The main take on it, if done successfully, is to cover the mortgage costs and earn a profit. The longer you hold onto the property, the more potential appreciation you can enjoy on the property value.
- Residential Rental Income
An excellent way to use real estate investing in Canada is to purchase a residential property and rent it out. Owning residential property opens the opportunity for you to earn an income from your investment through monthly payments from your tenants.
The income you earn can go towards paying off the mortgage on the property and adding more cash flow for your use.
Keep in mind that owning residential real estate is hard work. It is an active investment, and you will need to be involved in the affairs of your property with a hands-on approach.
There are other alternatives as well, if you do not want to play the role of an active landlord, you can hire a property manager to deal with the tenants, look after the property for you, and ensure you get the rent on time.
- Commercial Rental
Commercial rental income is another method to generate income in Canada. Commercial properties can include anything from office buildings to shopping malls and everything in between.
Commercial properties allow businesses to operate to generate income. Owners of the property can earn significant income through the rent from their tenants.
Keep in mind, commercial real estate is also an active investment. You need to be hands-on managing the property and dealing with tenants. Depending on the type of property you own, the intricacies of handling the management of the property can also differ drastically.
There is also a substantial amount of capital needed up front to purchase a commercial rental property and many complexities of managing it, many people might not prefer directly purchasing a commercial property.
- Flipping Properties
If done right, flipping properties is a remarkable method of real estate investing in Canada.
The idea behind flipping houses is that you buy a property that needs to have work done. The property needs to have significant potential to increase in value if you renovate it.
While it may seem like a straightforward deal to buy houses, fix them up, and sell them for a profit, house flipping does not always pay off. You can run into a wide range of issues. You must know what you are getting into before you decide to go with this strategy. Buying just any property because it needs fixing up does not work. Searching for properties that require some cosmetic upgrades is a place to start but avoid major faults like a leaky basement or structural defects.
The best approach to this method is to first talk to a realtor and then if the property fits the bill, you need to calculate the cost of renovations and compare it to the final price once it is ready to sell. If it gives you the opportunity to turn a significant profit, it is worth the investment.
- Airbnb Your Property
You do not necessarily need to take a traditional approach when it comes to renting out residential property. Long-term rental websites like Airbnb allow you to rent out a space to help you earn some extra cash.
Make sure to consult any municipal bylaws and condominium board rules, wherever applicable, before you rent out your place on short-term rental through Airbnb.
- Land Rental Income
If you own vacant land, it can be rented out to any interested parties who may want to use the land for a variety of reasons. The most common source of land rental income is through renting it out to farmers.
As the farmland tenants, they will pay you the rent on a monthly or annual basis so that you can generate revenue. Keep in mind, if you earn rental income from vacant land, you may be liable to pay taxes on the revenue.
Owning land and using it for rental purposes can be beneficial for you even when you have no active tenants.
If you are not earning rental income from your vacant land, the CRA will consider your costs for maintaining the property as capital expenditures. It means that your expenses for maintaining the land, if any, can be added to the original cost of the property on sale.
- REIT Stocks
Real Estate Investment Trust Stocks are companies that own and operate income-generating properties.
A REIT can own a large portfolio of properties that can include commercial properties, including offices, apartments, hospitals, shopping centers, and even residential properties. REITs allow for opportunities to buy and sell shares of publicly traded REITs listed on the stock exchange through a broker.
Buying shares of a REIT offers you exposure to the real estate market without the hassle of a hands-on approach, it makes the real estate more accessible, and it provides a significant payout through dividends.
The REIT industry has been around for more than 25 years. From five REITs in Canada in 1996, there are almost 40 REITs trading on the Toronto Stock Exchange. The industry is increasing in popularity due to the ease REITs provide Canadian investors interested in the real estate sector.
Exit Excel Realty is here to assist you in any way we can relating to any interest of these 8 investment opportunities.