Nine more reasons...

1) Diversification
2) Market Timing
3) Leveragability
4) Tax Advantages
5) Cash Flow
6) Renewable Source of Capital
7) Free Title Ownership
8) Wealth Creation
9) Inflation Hedge

1) Diversification

Asset Class Diversification

Reducing the overall risk level of your investment portfolio is something many investors strive for and making real estate investments part of the solution comes with far-reaching benefits.

A fundamental component of investment risk reduction is asset class diversification. This helps to ensure at least a portion of your investment portfolio is performing well. Adding investment real estate to the range of asset classes you invest in will help offset the volatility of other assets, such as stocks. This reduces the overall risk level of your portfolio, providing steadier returns with reduced volatility.

balanced portfolio

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Economic Cycle & Regional Diversification

A key part of our due diligence process involves analyzing where a region falls within the typical economic cycle. When your investment properties are located in multiple regions you are maximizing your exposure to various economic cycles. This lets you more effectively capitalize on the benefits of market timing when you decide to sell a property.

investment market diversification

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The ongoing performance of your real estate investments can also be strengthened by choosing regions affected differently by various economic conditions. This is why, over time, a real estate portfolio spread out over various regions is preferred to one concentrated in a single region.

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2) Market Timing

Effective market timing (buy low/sell high) is a crucial component of successful real estate investing. While it is difficult to time when a market has reached the bottom of the real estate cycle, noting an upward trend and taking action (even if it means paying slightly more than you would at the bottom of the cycle) can translate into strong future returns.

investment real estate cycle

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Real estate market timing is not an exact science. A number of factors, including seller motivation, supply and demand, interest rates, employment trends and population growth can significantly affect pricing. A solid understanding of the real estate cycle, substantial market area research and the fortitude to get into the market can be hard for the individual, but when you work with Strategic Investment Realty, you are backed by a team of industry experts committed to your investing success.

As mentioned above, seller motivation is one of the factors that can greatly impact the price of a property and the timing of a purchase. The Buyers Emotional Cycle below illustrates the range of emotions most people face when purchasing real estate. All sellers were buyers at one point and this same emotional cycle applies. Therefore, understanding this cycle and taking a contrarian approach can greatly assist you in determining the motivation of the seller, which in turn can benefit you when negotiating a purchase price.

emotional investing cycle

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3) Leveragability

Leveraging Your Investment Capital

investment leverage

When you use borrowed capital to enhance the earning potential of an investment you are using the full power of leverage; and since real estate is a tangible or hard asset, financing is more readily available. The potential return on your leveraged real estate investment is substantially increased compared to a non-leveraged investment.

Leveraging Your Mortgage Financing

You are further benefiting from leverage when the rental income generated by your investment property is used to pay down your mortgage financing. The rental income earned by your property will usually be sufficient to offset your mortgage payments and all associated expenses for your unit.

Leveraging Your Time

When you choose to participate in the optional property management solutions offered by our approved suppliers you are choosing to leverage your time to your best advantage. Make a decision to purchase an investment property and let the professionals do what they do best. You benefit from owning a high quality investment, while the day-to-day tasks associated with managing the property are left to the professionals.

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4) Tax Advantages*

Tax Deferred Growth

Similar to an RRSP, the value appreciation of your real estate investment is sheltered from tax until you sell the property. For instance, if you purchase an $80,000 property that increases in value to $120,000, this capital gain of $40,000 is sheltered from tax until you sell. When you own multiple properties this benefit compounds since there is no limit to how much growth you can shelter with real estate investments.

Tax Breaks

When you do sell your property and thereby trigger a capital gain you will benefit from the capital gains status of this profit. This means 50 percent of your capital gain is taxed at your marginal tax rate, while 50 percent of the gain is tax free! This 50 percent tax free profit can quickly add up when you own multiple properties.

Tax Deductions

Investment real estate allows for many tax deductions. The cost of financing and operating your property can be deducted from the income you earn. This includes mortgage interest, property taxes, property management fees (if applicable), repairs and maintenance and other related expenses that can be deducted from your gross rental income, thus minimizing the amount of tax you will pay.

*The specific tax benefits you will enjoy may differ from other investors, so be sure to consult your tax accountant for specific advice.

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5) Cash Flow

A fundamental benefit of real estate investing is its potential to generate income, especially over the long term as your mortgage is paid down. The income generated from your investment property will often be sufficient to offset your mortgage payment, taxes, condominium fees and other expenses, while still providing you with positive cash flow.

Your cash flow will be strengthened over time as you pay down your mortgage and funds can then be used to supplement your retirement income.

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6) Renewable Source of Capital

Investment real estate also provides you with a renewable source of capital through re-financing options as property values increase and mortgage financing decreases over time, and can effectively offset the potential diminishing capabilities of your RRSP.

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7) Free Title Ownership

Many of the real estate investments we present you with give you free title ownership and control over your property. You benefit from the security of free title ownership of a tangible asset, just like your own home. With this control comes the ability to sell, refinance or hold the property as you see fit.

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8) Wealth Creation

The equation is quite simple:

Mortgage Financing Reduction + Property Value Appreciation = Long Term Wealth Creation

investment property graph blue investment property portfolio grphs blue

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Over time, strategically selected real estate investments can be powerful vehicles for wealth creation. It is that simple. The value of your investment property increases, while the corresponding mortgage financing is reduced nominally through regular mortgage payments. The result is increased equity and increased wealth.

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9) Inflation Hedge

A long term real estate investing strategy is an effective hedge against inflation because the value of this asset class has historically increased at a rate similar to the rate of inflation. You are thereby ensuring that your “real” or hard asset will help maintain your wealth and corresponding standard of living.

Contact us today to learn how we can create a customized strategic plan that will have you enjoying the many benefits of real estate investment.

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