As the stock market tickers all turn red as of late, people are considering other options to putting their hard earned capital into besides these shiny alphabetic symbols. In my opinion the only other real avenue to build wealth is real estate and certain derivatives that are linked to real property. I’d like to discuss a few options that you may consider to diversify your portfolio besides the traditional mutual fund and RRSP contributions to hedge future inflation against your dollar.
Residential Rental Property
As you are probably aware there is a huge influx of immigration coming into Canada, the new Liberal government has been very in favor of new migration into the nation. With current population levels increasing there will be a definite need for living accommodation. Since at the moment the dream of home ownership is slipping away due to high housing values vs low average income, rental prices will continually increase making this investment well worth the time/effort to acquire and maintain.
Short Term Rentals
Although there is an attempt to put barriers to limit this type of real estate investment, I feel that short term rentals are here to stay. The lucrative return and overall benefits of having this type of investment far out weighs the work required to attain one. There are many platforms to advertise with most popular being Air BnB, Canada Stays and Bookings.com. If you are in the fortunate position of being able to reside at the property in one unit and run this type of business out of the other, you could live virtually free. If you are in the “single and looking for a starter home category” I would definitely investigate this strategy and consider the above option to sublet your mortgage.
Second Mortgage Investing
In these times the banks are being very strict in qualification of mortgages to people wanting to buy property. Second mortgages are a way to make financing work for people in the position to buy a property have the down payment but the banks are not willing to lend the entire amount needed for purchase. Often double digit returns are available to investors wanting to lend their capital in these types of investments. Low maintenance and good ROI is a winning combination in my opinion for this type of venture. But you must do your homework or have a knowledgeable adviser if you decide to go this route as with any investment there is risk. Participating in these myself I would have to say it is a large part of my portfolio and I have made very good gains with this type of investment.
As the wise saying goes “Don’t put all your eggs in one basket!” and diversifying is the best way to hedge your risk. Just as you spread your stock market capital into different sectors and funds, why not consider other options to invest in as well? Variety is the spice of life and this rings true for investments as well.
At Infinity 8 we are always available to help with all your real estate needs and investing options. We appreciate your time to read our articles and hope to connect with you soon!