Are you investing your money in the best way? That seems to be the big question asked by people who have a bit of savings put aside for a rainy day. Everywhere you go there are advertisements for stocks, bonds, mutual funds, portfolios, you name it. Those are all good investment options. If you were wondering, “is real estate a good investment?”, I am happy to report that in Toronto, especially in today’s economic climate, that answer is a resounding yes! Here are five strong reasons why real estate is a good investment.
Better Control Over Investment
The difference between investing in bonds or stocks versus investing in a property is that when you invest in stocks or bonds, you do not have much control over the potential return on your investment. Investing in property can give you control in two different ways. One way is by buying a property that needs renovations.
You can purchase the property at a low price and refurbish it so that when the rehabilitation is complete you will sell it for a greater market price. So long as you are careful about how much you are choosing to spend in renovations, you can make a very sizeable profit by flipping properties.
Another way to control your investment is by purchasing a property in an area where many homeowners are being priced out of the market. If they can no longer afford to purchase a property in that area they will be forced to rent. You can turn your investment into an income property, receiving monthly returns on your investment.
Cash Flow
Another reason why real estate is a good investment compared to stocks or bonds is that your money is not tied up until you sell. If the property you choose to invest in is an income property and you have a low mortgage, you can charge rent that is higher than your monthly mortgage and create instant monthly income.
This can pay off any extra expenses related to the property that you might not have budgeted for. Additionally, if the property does not need repairs you can reinvest your cash flow back into the property for upgrades so that your property will always boast a high value in the housing market.
It Is A Tangible Asset
Unlike stocks and bonds, a property’s value lies beyond what is depicted on a piece of paper. Even in the event the real estate market may dip and lower the value of your property, you never eliminate your physical asset.
This means you will never fully lose the value of your property – which is a definite possibility with other types of investments. Even if your property only increases its price with the rise of inflation, that tiny bump can lead to greater equity over time.
Access to Leverage
When you invest in real estate, you gain the opportunity to invest in other avenues, such as other properties to maximise your investment. This is what is known as “access to leverage”. If you put down 10-20% of a property’s value for a down payment and that property’s value increases over time, your equity also increases, despite your initial investment being the same.
Once you gain enough equity you can leverage it to buy other properties using a line of credit and using the first property as collateral. You can flip houses or use them as income property, either way, you can make a lot of money by spending a small amount when it comes to real estate!
Tax Incentives For Investing
It is common knowledge that first-time homeowners can receive tax deductions and incentives for purchasing their first property. But did you know that real estate investors also have their own set of tax incentives?
Whether you choose to invest in real estate to flip houses or to ensure a monthly income, you can deduct the expenses of a very substantial amount, giving you more money to invest in the future.
The math seems easy; if you add everything up, answering the question “is real estate a good investment?” is a no-brainer. With such low initial costs and great returns on investment, if you are looking to invest right now, a property is the way to go.
If you want to know more about the Toronto real estate market, feel free to get in touch today!
