Real estate can be a great source of passive income, and the earlier you start to invest, the bigger your chance to reap higher returns. You can make money by owning residential properties, as well as industrial and commercial real estate. Renting and flipping can also provide you income.
Real estate investing can be simple, but it is not that easy. Investors need to understand the basics of real estate investment, including economics, and risks. Here are some of the basics you need to know as a beginner:
You should aim for long-term investments
The real estate market is highly unpredictable, so a short-term investment can be risky. Aim for long-term investments where you can get higher profits.
Identify your investment goals
Most people invest in real estate intending to save up for retirement. When you decide to invest in real estate, you need to think about your investment goals.
You can earn from cash flow
In Toronto, you can earn money in real estate in three ways: cash flow, appreciation, and equity. When you invest in properties, you can collect income from rent. It’s hard to get by cash flow positive properties, but investors can often break-even monthly.
You can earn from property appreciation
You can earn from selling a property in the amount that’s more than how much it was purchased; that’s the appreciation. In Toronto, properties appreciate in favour of the investors.
You can earn through equity
Investors build equity when tenants pay their mortgage. Buy a property, rent it for several years, and apply the rent to the mortgage. You will have a mortgage-free property in time and build even higher equity when you decide to sell the property afterwards.
Your investment is subject to taxes
Any income you generate through your real estate investment is subject to taxation. These include the money you collected from rent and the increase in the value of your property from the time you bought it until it’s sold. Communicate with your accountant so that you have a better understanding of the tax implications of purchasing a property.
Aside from paying taxes, you can benefit from tax deductions. You can receive tax benefits for any property upgrade you made, having a home office, cleaning and maintenance supplies, and travel costs, among others.
There are several ways you can earn by investing in real estate, and owning a property is one of the basic ways. The items discussed above are some of the basic things beginners need to know to help them decide where to begin investing. The essential thing is that when you start to invest in real estate, be committed and prepared for all the responsibilities.
If you’re looking to buy real estate in Toronto, get in touch with us today – we’re happy to help you find a property that suits you.