A real-estate agent once told me that her biggest fulfillment from her job is to match people with their dream homes. I was wowed by her passion for what she does. Have you thought of what your dream home would look like? Where would it be? What favorite places would you love to have just down the street? For me, I would love to live in a condo in Toronto since it’s close to the music scene, U of T & Chinese grocery stores – yay for saving on transportation costs. I also know it’s not cheap. How would I effectively buy and maintain a condo like that? Good question.
I’ve heard people say time and again to get into real estate investing, as it is solid to have. If my job is to match people to their dream homes, and have it be a solid investment for them and a return for myself too, that’s not a bad proposal.
I’m a total newbie to this area, and you might be too, so let’s dive into the topic together.
Based on the top three Google listings for “real estate investment strategies”, here are the biggest take-away points I found:
Don Campbell, senior analyst at the Real Estate Investment Network in Vancouver, recommends we buy where job growth and GDP growth is. Don’t buy cheap, rather, buy where long-term demand is good. No one asset type should take up more than 50% of an investor’s portfolio.
Some people like David Kaufman, CEO of Toronto-based Westcourt Capital Corp., simply don’t see homes as investment options. “They think real estate will always go up in value ahead of inflation, but that assumption must be fallacious at some point.” That’s an interesting point of view, one that I don’t hear very often.
This article gives us insight into the top 5 real-estate investment strategies:
1. Buy and Hold: buy an undervalued rental property and have tenants pay off the mortgage gradually so that you have a mortgage-free property & an indefinite rental income. Pretty smart – also a popular strategy.
2. The Flip: buy a significiantly undervalued home, renovate and sell for a profit.
3. Hybrid: strategies 1 and 2, combined.
4. Joint Venture: if you don’t have enough money for what you want to buy, team up with someone with the same investment goals.
5. Rent to Own: buy a property, and look for future owners who want to own a home but can’t because of insufficient credit ratings or down payment.
This article shows us all the cool real estate niches we can go into, and recommends we pick one and specialize first: raw land, single family homes, duplex/triplex/quads, small apartments, large apartments, Real Estate Investment Trusts (REITs), commercial property, mobile homes, tax liens and notes (mortgage-backed securities).
Duplex / Triplex / Quads: Small multifamily properties (2-4 units)
Small apartments: made up of between 5 and 50 units.
REIT: Real Estate Investment Trust. In the most simplistic definition, a REIT is to a real estate property as a mutual fund is to a stock. REITs invest in large properties such as shopping malls and apartment complexes, or small family homes in bulk.
Tax Liens: When homeowners don’t pay their taxes, the government (local, state, or federal) can foreclose and resell the property to investors for the amount of taxes owed. Not sure if the strategy is for us to buy foreclosed property and sell it.
Commercial: for whatever reason, not recommended for beginners.
Large apartments: can cost millions, but has stable rental income.
The article also stresses the importance of having a solid business plan.
What would I recommend for us students? Here are some questions to think about:
1. Do you want to do real estate? If you’re tentative, are you interested in learning more?
2. When do you want to start investing: is it now or when you graduate?
3. Do you want to invest, be an agent, or both?
4. Which of the top 5 investment strategies look most appealing to you?
5. Which niche do you want to learn more about?
6. How are you going to make money?
I’ll get involved once I graduate and have enough saved for a condo downpayment; then I’ll aim for the investment route while partnering with an agent. Then after that, after I’ve got my own condo, I’ll get some similar ones in the same area through joint ventures and do buy n’ hold. I’ll start small with small apartments, then scale up to large ones. I see myself doing real estate as a side hustle, since I’ve got other passions I want to pursue in my day job.
Also wanted to mention: our student subletting market is terribly underserved: a lot of us who take on 1-year rentals find out that we have to sublet at a deep loss when we go on co-op terms in the summer. If you are passionate about solving that problem, you can give students tremendous value by charging them the market price for every term (Winter, Spring, Fall) instead of one price the entire year. I myself have also had experiences with slow maintenance, dirty basements, landlords who accidentally order their cleaning staff to throw out all my groceries thinking that I’m not going to stay another term when I actually am. It would do the student sublet community great good to be a landlord who cares about your tenants.
I wish you the best whether you would like to learn more about real estate, commit to it, or even put it aside for now and come back to it. Thanks for reading!