Investing in real estate is primordial. Since time immemorial, it has been one of the oldest forms of investing. In this day and age, it is apparent that real estate is a booming industry.  Real estate is one of the five basic asset classes that every investor should not ignore and should take advantage of. Every investor should seriously consider adding real estate investment into their portfolio, given the unique cash flow, liquidity, profitability, tax, and diversification benefits the industry offers.

Real Estate Investing

So what does real estate investment entail? In a nutshell, real estate investing pertains to the purchase, ownership, management, rental and/or sale of real estate for profit. There are four ways to make money in real estate: real estate appreciation (when property increases in value), cash flow income (through rent), real estate related income (income generated by brokers and other industry specialists), and ancillary real estate investment income (such as vending machines in office buildings or laundry facilities in low-rent apartments).

Toronto, Canada is a terrific place to look into making investments and generating more money out of the real estate market. As there is a wide array of home options in Toronto and not to mention the public’s clamour for owning homes, investors can surely profit from buying, renting, flipping, and selling properties. That said, here’s a basic investor’s guide for real estate in Toronto:

// Financial Ruling

First off, knowing the financial ruling when it comes to real estate in Toronto, Canada is paramount. Please be advised that getting a mortgage for a second property entails at least 20% of the purchase price for a down payment. Only a portion of the income obtained from rent will qualify you for a mortgage – usually 80%. For commercial properties, a down payment of 50% is typically required.

// Real Estate Taxation

Investors should also know the facets of taxation in real estate. In Canada, income generated from rent is subject to regular taxation. The same is trued for an investment property which increases in value and is subject to capital gain taxes. Given the complexity of taxation, it’s best to talk with your accountant before taking the plunge into real estate investment.

// Timing

Having long-term objectives in real estate is imperative. Being wary of investment timing is crucial. This is because the real estate market can be quite unpredictable. You should know when to peak and make the right investment, lest you end up risking your money by expecting to profit in a short period of time.

// Investment Goals

Investment goals are in critical in your decision-making. In Toronto, for one, you can make (and lose) money by investing  in three ways:

• Cash flow – This basically refers to the difference between what you collect in rent and the expenses you pay out. You need to assess if you are earning more in rent collection as compared to making expenses on your real estate investment.

• Appreciation – This happens when you sell an investment property for more than what you have initially paid. For instance, let’s say that you bought a condo at $1,000,000, then later sold it at  $1,300,000. The $300,000 difference is the appreciation in the value of your investment. Hence, you’ve earned a good profit out of this investment.

• Equity – This occurs when a tenant pays down your mortgage. In such a case, you are building equity.

// Real Estate ROI

Finally, the return of investment (ROI) is what you are looking forward to. To put it simply, this entails the profit earned from out of the investment you’ve pursued. You can  calculate your profit via the following:

• Cash Flow (the net amount of cash moving in and out of an investment);
• Capitalization Rate (cap rate which is the rate of return on a real estate investment property based on the income that the property is expected to generate)
• Return on Investment (performance measure used to evaluate the efficiency of an investment).

Utilizing these three methods will help you reach the actual ROI for your real estate investment.

If you’re looking to buy real estate in Toronto, get in touch with us today – we’re happy to help. We have a wide range of properties available.