Many of you believe that real estate is no longer good; there are many ways other than real estate to make a fortune. You are not wrong!
There are indeed many ways to prosper, to grow rich or to make a fortune, but I do not know any other investment vehicle that offers as many benefits as real estate.
While you may be able to count on your RRSP investments, but with the returns of recent years, the aging of the population, and the diminished pension funds, let me question the validity of this strategy.
Another possible choice would be to redouble your efforts and work more hours per week in order to raise your one million. But let’s be honest! How long have you been working and how much money have you managed to raise so far?
You could invest in the stock market, but you would be subject to the yo-yo fluctuations of this type of investment, and you will not be able to benefit from the real estate leverage, with some exceptions. But let us not fool ourselves, many still made a fortune on the stock market. I do not pretend that there is no money to be made on the stock exchange.
You might discover a genius idea that will make you an instant millionaire or hope to win the lottery! Good luck.
So, this week, let me give you a list of various reasons why real estate should be part of your enrichment strategy over time. I know from experience that everything is not rosy and real estate, like any business, has its disadvantages and disadvantages, I agree, be reassured!
1: All must lodge
In the same way as feeding, clothing, and sleeping, housing is an essential need of the human who will always seek to have a roof, whatever it is. As a result, the real estate market is a sector that will always be in demand.
There will, of course, be several aspects to consider when analyzing and making decisions such as the economy, aging of the population, urban development, market trends, etc.
Keep in mind, however, that the location of your buildings will always be one of the determining factors in the success of your investments. A beautifully located building could cost you a lot in the long run. Conversely, an ugly building could earn you a lot if it is well located.
2: The leverage effect
Here is a term we often hear in the area of investment: leverage. This allows you to acquire assets with little or no cash. All have already heard the expression ADA, the money of others. The principle is very simple and even more wonderful if you borrow 100% of the funds.
To illustrate the point, consider for example the purchase of a quadruplex that can be acquired with a 10% down payment if the loan is insured by a mortgage insurer such as the Canadian Mortgage and Housing Corporation (CMHC).
However, you will be able to acquire an asset of the order of $ 500,000 with only $ 50,000 in cash. Do you know a lot of investments that allow this?
What if you bought the quadruplex in question without having to take money out of your pockets?
On social media, it is common to read that it is no longer possible to buy without cash. However, just because you’ve never done it does not mean it’s impossible to do it.
Using leverage to the maximum makes real estate investment accessible to everyone.
3: Real estate has always gone through time.
The greatest fortunes since the beginning of time have always included large real estate portfolios. Real estate occupies and will always occupy a large place in the economy. This is one of the pillars.
Although markets and interest rates fluctuate, the real estate market remains relatively stable. If you also want to pass through market fluctuations and enrich yourself “passively” during the holding period of your assets, you will have to pay your buildings the right price, that is to say, to make the most profits from purchase possible to protect you from the eventual decline in values.
Do not forget that everything is a question of a cycle and that everything that goes up, will come down one day to go back again. Be patient!
4: “flips” will quickly replace your job
Now popular and publicized, real estate flips have existed for a very long time. The principle of buying a good and reselling it at a profit is at the very heart of the trade. Applied to real estate, this will allow you to generate cash faster in comparison with the purchase of rental properties, and by the same token, could allow you a faster transition to real estate.
Flips are the best way to quickly live real estate. Revenue generated is tangible faster than enrichment through building accumulation in the long run, but remember, big builders have always opted for quick money enrichment. Patience has its virtues.
5: Three incredible combined returns
While flips can generate cash quickly, the long-term purchase of income properties generates recurring cash flows that are cashed monthly. This is the first return on your cash invested if any.
In addition, you will receive a second return when your tenants repay the mortgage loan related to the building. The portion of capital repaid will grow larger and the enrichment will be exponential over time. This is the same principle as compound interest that increases over time in investments. As we often hear the popular expression: “Time makes its effect in real estate. ”
Finally, you will achieve the third return because your property will appreciate over time. Are buildings currently worth more than 25 years ago, 50 years ago, 100 years ago? To ask the question is to answer it.
In summary, it will take more time with the rental real estate to generate cash in your bank account but be patient. You will be enriched by these three returns: the cash surplus, the capitalization of loans and the appreciation of your buildings. Like your net worth, the cash flow will grow over time and you may one day achieve financial independence. Who knows?
6: Will your pension funds be sufficient?
Many people are blindly preparing for retirement or worse yet, do not plan for it, and rely solely on the government, hoping for a golden retirement. Just relying on your employer to ensure your old age is often insufficient. The investment property can allow you to enjoy life without having to deprive yourself, all things being relative. The investment property has the advantage to be able to enrich, even part-time.
7: Group investment
Make the most of what you are the best! Here is one of the wonderful benefits of real estate partnership. Whether you have money to invest, negotiating skills, whether you are good at research, construction or otherwise, the partnership is an avenue used by many to take their first steps, make better deals and/or to increase their yields.
However, everyone’s expectations, obligations, and responsibilities must be clearly defined in a shareholder agreement or other legal partnership agreement. Do your homework before you join, because not all partnerships work well! Some people may end up in an unfortunate situation caused by the excitement of a hasty project. Take the time to choose your associates.
8: Because real estate is exciting
Ironically, I often meet people who are passionate about real estate but have never done so. In my opinion, they are passionate about the dream that real estate can represent.
On the other hand, most of the people I meet are true enthusiasts. As much as they may like to visit buildings, meet sellers, negotiate, solve problems of tenants, find themselves in privileged situations that bring them extraordinary transactions, create the freedom, be their own boss, etc. So many reasons that make people passionate about real estate investing. What are yours?
9: Control over the investment
Real estate is tangible! You own a property, an asset and have decision-making power over a number of critical factors. I am thinking, among other things, of the price you will pay for the building, which sector you will buy, the person who will manage the building, what kind of clientele will enter your buildings, what price of rent will they pay, what will be the inclusions? and exclusions from the agreement, to name just a few. Control over your investments is important and real estate offers this undeniable advantage.
Keep in mind that these are just suggestions and not obligations. If you develop your negotiating skills and buy buildings with high rent increase potential, you will work wonders!
Here is one interesting article to read more on the topic.