Investing in Canadian real estate can be done in a number of ways, each with its own level of risk and reward, depending on your personal situation, budget and goals. Here are the 7 common ways to invest in real estate in Canada.

1. The Buy and Hold Strategy

As one of the simplest strategies, the Buy and Hold method involves purchasing a property under market value and renting it out to sub-tenants for a long time. The goal is that by renting out the property for the long-term, eventually the tenants will pay off the mortgage and you’ll end up with a property that you completely own. The only thing you need to consider is that you will need 20% of the down payment and to ensure that you will earn enough income off your property, in order to pay off its expenses.

2. Buy, Fix and Flip

You may recognize this strategy from popular renovation tv shows throughout North America. To put it simply, you purchase a property under market value, completely renovate it and then try to sell it for a decent profit. This method can be a little trickier, because it can be hard to find a suitable property to ‘flip’ and furthermore difficult to find a buyer. You will technically be losing money until you are able to find a buyer. The best way to ensure you will be successful is to consider all your financing costs in advance.

3. The Hybrid Strategy (Buy and, Fix and Hold)

This strategy is a combination of the previous two. Its purpose is to find a property under market value, renovate it, but instead of selling the property, you intend to rent it out for the long-term. Similarly to the ‘Flip’ it is wise to plan out the financing costs beforehand, to ensure that you don’t lose any investments.

4. The Joint Venture Strategy

This method is perfect for those who either don’t have cash to invest upfront,  or the have money to invest, but don’t have the time or experience to do it themselves. These two groups have similar goals, but opposite problems and will often partner together. The investor will put up the initial down payment and closing costs and the expert investor will use their team to find a suitable property, screen tenants and manage the day-to-day for a fixed period of time. At the end of this time the partners can sell, refinance or continue on as before. In most cases when the property is sold the investor receives their initial investment back and the remaining appreciation and mortgage paydown is split 50-50.

5. The Rent To Own Strategy

This strategy also involves the purchase of a property with the intention to sell, but the buyer is someone who will rent the home until they’re in a financial position to do so. The owner/investor of the property works out a deal where the tenant will pay a monthly rent, followed by an extra monthly payment which is a down-payment paid over time. This gives people who wouldn’t usually be able to buy a house the chance to purchase one over a long period of time, until it has been paid off.

6. Private Mortgage Lending

This is the preferred method for those who have money to invest at typically much higher rates than they get from stocks or GICs, but don’t want to manage a property or tenants themselves. Often called ‘hard money lenders’ these investors can lend directly to investors or through a mortgage broker who works with investors and can help screen potential borrowers and projects.

7. Managed Lending

This final method allows you to use registered funds (RRSP, TFSA, LIRA, RESPs etc) and pool them with other investors. Recently syndicated mortgages have become popular as one method where numerous investors will pool their money to find the initial stages of a development such as a condo or commercial building; these funds are usually locked in for a minimum amount of time and the investor is paid out when a traditional lender, such as a bank provides better rates to the project once it’s established. A Mortgage Investment Corporation (MIC) is another option for managed lending where investors can make their money available to borrowers and have it secured by the equity in the borrower’s home. This is typically done when someone wants to consolidate their debt at a lower rate or wants to borrow to purchase a new property and use equity in their current home as collateral for the down payment.

At AssetMill, we’ve used all these strategies ourselves and can help you make an informed decision on the investment strategy that suits your needs and financial goals. Contact us for more information on ways we can help you.