Ottawa is a city with a variety of real estate in thriving, large neighbourhoods. In an appreciating market like Ottawa, real estate investments can provide significant financial benefits. There are a number of ways through which you can invest in real estate, each with its own unique advantages, disadvantages, risks and rewards. With careful planning and execution, investing in real estate can be a great way to achieve your financial goals.
In this blog post, we’ll summarize the differences between some common forms of real estate investment. As with any major financial investment, always consider your options and do extensive research before coming to a decision.
Rental properties are one of the most popular types of real estate investments. When you purchase a rental property, you become a landlord and are responsible for maintaining the home, finding tenants and collecting rent as well as adhering to the regulations found in the Ontario Residential Tenancies Act. Rental properties can provide a steady stream of income and can appreciate in value over time while helping you pay off the mortgage on the property. A property manager can help alleviate a lot of those duties but at the end of the day the landlord is responsible for the property and the tenants.
If you don’t have the financial means to own both a personal home and a rental property, consider renovating and renting out your basement. The tenants’ rent can also help pay off your mortgage. Co-owning a rental property is also an option if you have a fitting candidate for a business partner in mind.
As previously mentioned, Ottawa has been an appreciating market for several consecutive years now. This means that the value of your home will most likely increase over time. If you purchase a property strategically with the intention of selling it in the future, you could make a significant profit. To receive a good return in the national capital region, some of the most important factors are location and timing. Purchasing a home in a developing area can provide a noteworthy return on investment.
However, there is no guarantee that your property will appreciate in value as this is a very speculative strategy which can be risky. It could also take many years to sell your home for a profit, so be prepared to hold the asset long term. As a result, this is one of the most passive but least effective investing strategies and is better used in conjunction with other strategies.
Fix-and-flip investing involves purchasing a property, making improvements and then selling it for financial gain. This type of investment can be extremely profitable if you are thorough with your budgets, timelines, tax planning and loan strategies. Also, instead of selling at the end of the flip, you could consider refinancing with the bank allowing you to keep the property and still pull out up to 80% of the value. Just be sure you can afford to maintain the property afterwards, turning it into a rental can be a great way to do it.
Purchasing a commercial property can be a very lucrative option if you have a lot of up front capital. Renting to business owners or holding onto a lot for long term passive appreciation can provide strong financial returns. As with any other form of investment, commercial real estate comes with its own risks and rewards. However, if you do your due diligence and choose a property in a prime location, you can minimize the risks and maximize the potential financial return on your investment.
While there are many more ways to invest in real estate, these are some of the most common. Real estate transactions are pretty significant financial decisions, so make sure to do your research and speak with a financial advisor to help you determine which form of investment is right for you. When exploring the Ottawa real estate market, also consider reaching out to any of us at Royal LePage Team Realty, as we have extensive experience in the city we call “home”.