One of the many things that the global pandemic has taught us is the importance of having a strong financial plan.
According to a survey on the financial well-being of Canadians, 37% of Canadian households accessed their savings to cope with the impact of COVID-19. There’s also a whopping 61% of Canadian households whose debt increased during the pandemic.
Because of the uncertainties around us, it’s best to regularly revisit your financial plan. Many have realized that having a certain level of financial security can reduce fears and anxiety when things go astray. People are now exploring ways to make extra money and increase their income. If you’re one of those people, real estate is something you may want to consider.
Here are successful ways you can pump up your savings in the field of real estate.
How to Make Money in Real Estate
1. Rental properties
The most common way to make money in real estate is by buying residential properties to rent out. A place to live will always be a necessity for everyone, whether they’re single, newly-married, part of a big family or retiring.
2. Rent out spare space
Can’t afford to buy a rental property just yet? You can still generate rental income from what you already have by tapping into online platforms such as AirBnB and VRBO. If you have a spare room, you can rent it out short-term. But do this with planning and calculated risk, since you’ll be having additional expenses, such as maintenance costs. You‘ll also have to put your best foot forward as a host or hostess.
3. House flipping
People have become more and more adventurous with fix-and-flips, thanks to home renovation shows. House flipping means buying a property, fixing it up to increase its value and selling it for profit. Then again, home renovation flips or house flipping is tricky for first-timers.
In order to do this successfully, you need to have an eye and understanding of renovations of the real estate property and an accurate estimate of how much the project will cost. This’ll help you plan your cash flow. Here are two tips from the experienced: buy the most unpleasant looking house in the neighbourhood and find a reputable and experienced contractor who you can work with.
4. Commercial real estate
As long as there are industries and businesses, commercial real estate’s needed. Investing in commercial real estate is a lucrative way to earn profit and have a stable income.
5. Invest in REITs
If you want to invest in real estate without purchasing and going through the process of getting a mortgage and putting down payments, invest in Real Estate Investment Trusts (REITs). Similar to mutual funds, a REIT involves pooling funds from different investors in order to buy real estate properties, most of which are commercial in nature. It’s important to remember to invest based on your risk tolerance, because just like stocks, a Canadian REIT can fluctuate with the market.
6. Purchase a Power of Sale (PoS)
Purchasing a property that has entered a power of sale can be a great opportunity. As the purchaser, you’ll be able to buy the property below market value. Be warned however, a PoS can have drawbacks and the purchase of one shouldn’t be taken lightly. Be sure to enlist the help of a real estate professional to make sure you cover all bases before you take the plunge.
Should you enter the business?
There are a lot of benefits to real estate investing. But of course, there are also important factors to consider when it comes to making your decision: the location of your property; your risk tolerance; liquidity; and cash flow; Of course, you’ll still need to prepare your down payment and monthly mortgage payments.
When you’ve assessed your situation and still find yourself in a position to enter the business, financial success is possible with real estate investing.
Investing in real estate can be a great way to increase your income, diversify assets, build equity and strengthen your financial situation. But before entering the business, diligently research everything! Consult the experts and find ways to minimize costs and maximize profits. When done right, the success of the business is virtually guaranteed! Daisy Raouph’s a mortgage broker and financial security advisor who can help to guide you on this endeavor.