People have long used real estate as a way to invest for the future. Alongside other investments, investors have looked to properties like houses, apartment units, commercial properties and other types of real estate as a way of expanding their portfolios, earning income and planning ahead for retirement or sending a child to university. A recent study even showed that nearly half of pre-retired homeowners in the province are relying on the value of their home increasing to fund their retirement.
Some people consider the home that they live in to be an investment, which may gain value over time if housing prices increase. Other people may invest in real estate by purchasing property to lease to another person or business with a plan to earn income through the rental payments that the person or business provides. This is known as investing in ‘real property’ and is one of the most straightforward ways to generate an income through real estate.
Investing in real property is a very hands-on way of investing compared to purchasing traditional investment products, usually at a higher cost and demanding more time to manage. A property owner is responsible for handling paperwork, finding a tenant and making repairs, as well as covering all the costs that come with owning and maintaining the property, including any mortgages, taxes and utilities.
Investing in real property is a very hands-on way of investing in real estate, usually at a higher cost and demanding more time to manage.
Because of the time, cost and risks that come with owning a property as an investment, you may instead choose to invest in real estate through funds, trusts and other investment products that provide exposure to the real estate market without being required to manage and maintain properties on your own. Purchasing these products, such as a share of a publicly-traded real estate company, means you are investing in the real estate market without maintaining any properties yourself.
Why are people investing in real estate?
In recent years, Canada’s long-running low interest rate environment has bolstered the popularity of real estate investing as people search for alternative investments that promise greater returns than they might otherwise be able to achieve through conventional investments like stocks and bonds.
Real estate investments can offer a steady flow of income over time. Rent can provide a fixed amount of income that’s agreed upon in advance and paid on a regular basis.
Real estate investments can also play a helpful role in diversifying an investment portfolio. Adding real estate investments to a portfolio of diversified assets can help manage its overall risk, helping investors reduce the risk of their portfolios without sacrificing potential returns.
These factors can make real estate investments a useful addition to a well-diversified portfolio, but as with any investment, there are a number of risks and uncertainties that come with real estate that should be carefully considered. Different types of real estate investment products come with their own unique sets of features and risks, and it is important to understand how they work before choosing to invest.Skip table of contents review Review table of contents