Although the housing market has seen its fair share of ups and downs over the past few years, no doubt in part thanks to the pandemic, investing in real estate is still a great opportunity to earn higher-than-average returns while diversifying your portfolio. It’s one of the safest investments you can make with your money since homes generally only appreciate over time, whereas something like a vehicle depreciates over time. So, today, our experts at Soni Chachad Real Estate have compiled 7 ways to invest in real estate in 2023 to help you decide how you’d like to break into the real estate market this year.

1. Buying Your Own Primary Home

First up on our list is buying your own primary home. Though you may not think of your first residence as an investment, it’s actually one of the best ways to begin investing in real estate and offers numerous benefits. For starters, you can build equity in your home from your monthly payments rather than paying rent and, in essence, paying someone else’s mortgage. Plus, your mortgage payments will generally stay the same for the entirety of your mortgage and won’t be affected by inflation like if you had rented. Beyond this, banks will often treat owner-occupied residents more favourably, giving borrowers a lower mortgage rate and requiring a lower down payment. Not to mention, the Canadian government offers a variety of tax breaks and credits for homeowners that you can take advantage of.

2. House Hacking

A second way to invest in the real estate market in 2023 is to try house hacking. House hacking is an excellent strategy for an investor who wants to generate income while living in their investment property. Essentially, it involves buying a multi-family property (such as a duplex or triplex) and living in one of the units while renting out the other units. In this case, the investor is able to generate rental income to help cover the cost of their mortgage, taxes, and other expenses while also building wealth over time. However, with house hacking, you do need to be prepared to become a landlord and should always be knowledgeable about the rules and regulations surrounding landlordship in your area.

3. Flipping Homes

One of the most popular methods of investing in the real estate market is to begin flipping homes. This involves buying a property that needs some work, fixing it up, and then selling it for a profit. However, there are a few things to keep in mind with house flipping. For one, you need to be deliberate about the area you choose to invest in; in other words, do your research before making a move on a property. Second, remember that you need to have the financial resources available to buy the property and make the necessary repairs. And finally, depending on your level of expertise, you may want to hire a contractor to help you do the work, as they will ensure it’s completed at a professional level, ultimately making it much easier for you to sell in the end.

4. Buying Land

If buying your own home, becoming a landlord, or flipping houses doesn’t sound like the right option for you, you might consider buying land. To begin, there is often less competition for raw land since many people are looking for a home, not just the land. This works to your advantage though because land will always be in demand and will increase in value over time. Not to mention, you could see exponential profits if a developer wants to buy your land for a future development. But what if the land you’re buying is more rural? In that case, you might think about renting out the land to local farmers for cattle grazing or crop growing. Either way, buying land can be an excellent opportunity and holds a high potential for a great return on investment (ROI).

5. Short or Long-Term Rental

Arguably the most classic way to get started with investing in real estate is to buy a property and rent it out. Once you have a property, you might lease it to a long-term tenant or decide to place it on a short-term rental platform such as Airbnb or Vrbo. Similar to the house hacking suggestion, this tactic will help you generate income to cover things like your mortgage payments, taxes, insurance, and other relevant expenses. Here, the main thing to consider is whether you want to be a landlord or just a short-term rental host. Of course, both have pros and cons, so be sure to think about all the different factors that apply to your situation before making a decision.

6. Look into REITs or REIT ETFs

Another option to get into real estate investment is investing in a REIT (Real Estate Investment Trust) or an ETF (exchange-traded fund). With a REIT or REIT ETF, you don’t actually own property but rather trade stocks and participate in the running of a trust that owns real estate, such as office buildings, rental spaces, hotels, and other types of non-residential properties. So, why is this a strategy you should consider? Well, not only can you invest in many REITs at once instead of just one at a time, but they’re basically dividend-paying stocks, meaning they may provide some hedge against inflation. 

7. Real Estate Limited Partnerships

Finally, a real estate limited partnership (RELP) allows you to invest in a diversified portfolio of properties alongside other investors who pool money to buy, lease, develop, and sell properties together. There are several benefits of this strategy, such as the real estate tax benefits are similar to outright ownership, passive investments require no investor involvement, and the liability is limited to the amount invested. However, one thing to keep in mind is you should know who you’re partnering with to minimize the potential for conflict and ensure that a disproportionate level of involvement doesn’t occur.

Final Thoughts 

So, now that you’re aware of the various different types of real estate investments available to you, it’s time to decide which one sounds like the right fit. You might opt for a more traditional route with something like purchasing your own home, house hacking, flipping homes, or looking into short or long-term rentals. On the other hand, you might be more interested in something like buying land or looking into REITs or RELPs. No matter what you decide, an investment in the real estate market is always a great choice as it helps diversify your portfolio and offers opportunities for cash flow, tax breaks, equity building, and a hedge against inflation.

If you’d like more information regarding any of these real estate options or are searching for an experienced, reputable realtor in the Golden Horseshoe region to represent you as a buyer or seller in your next home transaction, be sure to check out my featured listings and do not hesitate to reach out to me directly!