Scott’s Five Favourite Ways to Invest in Real Estate
Real estate is not a one-size-fits-all industry. If you want to become an investor, you may have more options than you realized. I’ve tried a lot of different methods and these are some of my favourite ways to invest in real estate.
Secondary suites are a great way to get started in the real estate investment business, mainly because you don’t have to purchase a second property in order to become a landlord. If you have a basement you can turn it into a legal apartment (depending on the laws in your area) and start making money off your existing home. The other bonus is that the upgrades required to create a legal income suite often add value to the home. So not only do you make money from renters, you make money from value-added renovations.
Dedicated Student Rentals
Student rentals are the backbone of my real estate investing career. They’re how I got my start and I still invest in them regularly. In fact, to date, they are still the most profitable properties in my real estate portfolio. There are a couple of reasons for this. One is that when you’re dealing with students you can rent out by the room (which increases your bottom line), and if the property is near a school you’re pretty much guaranteed to have consistent renters. I have yet to find a university or college town that didn’t lack student housing. But that same reason means that you’ll have a high turnover rate (every September!), which will require a bit more work on your part.
Renting out a vacation property is a great way to have your cake and eat it too. If you play your cards right you can enjoy it when you want to, and have it make money for you when you’re not using it. Vacation rentals are pretty comparable to executive rentals when it comes to how much money you can make, but they also have some of the same challenges in that there’s a high turnover rate and it’s possible they may sit empty for periods of time. Make sure you’ve done your due diligence before you take the plunge and buy a vacation property.
When I started my career I really favoured the buy-and-hold method over traditional flipping. However, in recent years I’ve made room for both. Flipping basically means that you purchase a house in need of some upgrades, you make the value-adding changes, and then resell it quickly for a profit. The key to flipping a house successfully is all in the budgeting, and when you do it right it’s possible to make a lot of money in just a few weeks or months.
If you want to invest in real estate without ever owning a property, investing in a REIT is a great option. A REIT (Real Estate Investment Trust) invests in dozens, or even hundreds, of income-producing commercial properties such as office buildings, shopping malls and parking lots. They then offer shareholders the ability to share in the income and appreciation that the REIT’s real estate holdings produce. Investing in a REIT gives investors the opportunity to take part in ownership in a portfolio of real estate that they can actually drive past, without having to worry about the day-to-day management of properties, assets and tenants.