WHY INVEST IN TORONTO
Its common knowledge that owning your own home is an investment in your long-term wealth. Investing in property outside of your primary residence is no different. It can be an excellent part of a healthy, balanced portfolio. Unlike buying stocks, bonds or other financial products, real estate is, well, real! You own the property and have complete control over it within the bounds of the law. The recent past has shown consistent growth in Toronto, well above the rate of inflation. Part of this has to do with how unique the city is. It’s a vibrant and welcoming metropolis nestled within a stable democracy and a rich nation. It’s an overwhelmingly safe city by a freshwater lake, surrounded by natural beauty, yet located in the heart of one of the largest economic regions in the hemisphere. Because of this, the city is expected to continue to increase in size, year-after-year. Those newcomers - whether they’re from elsewhere in Canada, or around the world - will need a place to live. It’s one of the reasons there is so much construction going on. That isn’t to say that real estate doesn’t carry risks. But with careful planning and the right guidance, your money should grow - we’ve seen it happen hundreds of times, and with our help, we hope to see you grow financially too.
In the abstract, all real estate investment follows this formula.
Financing: Determine how you will finance this investment, either by using your savings or borrowing money.
Budget: Account for all costs and keep them low, whether it’s taxes, insurance, maintenance, fees, renovations, etc. you will need to keep track of all the money coming in and all the money going out.
Plan: Find an investment strategy that you want to pursue and create a plan to execute.
Buy a property: Work with one of our agents to figure out the best property for your investment needs.
Get a return: If you’re renting out, building equity or selling, the whole point is to get a return on investment.
Yes, this sounds very simple, and it is. But that doesn’t mean it’s easy. It can be challenging work. Challenging, but also highly lucrative.
The starting point of any investment is money. Here are three ways most people find capital in the real estate market to start their investment.
The most basic form of financing: self-financing. You’ve built up your own savings over time and you want a place that will give you a higher rate of return than the bank’s savings account.
You’ve built up equity in a property and you want to leverage that asset to reinvest in a new property. This is common with landlords, who can purchase several properties over time by refinancing the homes they already own. This allows them to get new properties and more tenants, creating a growth cycle. Refinancing can allow you to take up to 80% of the value of the asset, minus what is owing on the original mortgage. For example: If the value of the property is assessed at $100,000, with $20,000 still owing on the mortgage, that means most banks would be willing to give you $60,000 in refinancing. (80% of $100,000 = $80,000. $80,000 minus $20,000 = $60,000.) That $60,000 can go a long way to investing in a similar property.
Create a fund
A fund is simply a pool of money that you and others contribute towards to finance an investment project. A fund can be as informal as convincing friends or relatives to pitch in some money together to finance a project, or it can be as formal as courting other business owners and real estate financiers. Either way, it’s prudent to have a lawyer draw up a solid contract between the fund partners to appropriately portion out the risks, responsibilities, and rewards of the investment. It may also be a good idea to limit personal liability by creating a corporation for the investment fund. This will mitigate any risk of loss or damages to the corporate entity and its assets and not your own assets and those belonging to your partners.