How to Make Money in Real Estate

Since the Bank of Canada (BoC) started raising interest rates about a year ago, economists and market analysts have been discussing the possibility of the country slipping into a recession. Recent economic data make both cases: the Canadian economy is on the brink of an economic downturn, and the nation will avert a recession. But whatever the economic landscape will shape out to be in the coming months, a considerable percentage of consumers are still feeling confident about the state of their finances this year, even in the face of elevated inflation, rising borrowing costs, and ballooning debt levels.

According to results found in the RE/MAX Real Estate Outlook 2023 Report, more than half of Canadians (54 per cent) feel confident that their personal financial situation will remain stable in 2023. However, the same report revealed that 38 per cent are not confident in their financial situation, while 45 per cent are worried that additional rate hikes by the central bank will impede their ability to purchase a home in the national real estate market this year.

Whether this is because the Canadian labour market remains solid or many households still maintain their pandemic-era savings, the fact that a huge percentage of Canadians are confident about their wallets is a terrific sign for both the housing industry and the broader national economy.

That said, if your finances are strong, it’s possible to make money is real estate. Here are three strategies to consider.

How to Make Money in Real Estate

The RE/MAX Housing Market Outlook 2023 report found that 73 per cent of Canadians agree that home ownership is the best long-term investment they can make, up from 49 per cent in 2021.

The data support this notion, too. For example, according to the Canadian Real Estate Association (CREA), residential prices have maintained an upward trajectory for nearly two decades, whether you are looking at the average price or the HPI Aggregate Composite Benchmark.

Since January 2005, the typical home price in the Canadian real estate market has climbed approximately 200 per cent. By comparison, the S&P/TSX Composite Index has risen about 77 per cent in this same span. Put simply, home ownership is one of the best investments you can make, potentially even better than purchasing stocks and commodities

“Many Canadians have understandably expressed hesitancy about engaging in the real estate market early in 2023, in the wake of rising interest rates and broader economic uncertainties,” said Christopher Alexander, the President of RE/MAX Canada, in the report. “However, despite this, a greater number of Canadians consider real estate to be a solid long-term investment compared to this time last year.”

As economic conditions improve and the housing market stabilizes in the second half of 2023, Elton Ash, the Executive Vice President of RE/MAX Canada, believes “a more regular pace of activity will resume” in the Canadian real estate sector.

So, how can you effectively invest in real estate to achieve even a modicum of these gains in your lifetime?

How to Invest in Real Estate in Canada

#1 Rental Properties

Owning a rental property, be it a detached house or a condominium unit, can offer an excellent opportunity for regular income and considerable asset appreciation. In addition, there are plenty of tax-deductible-related expenses that you can utilize to your advantage that can add more to your real estate investment.

#2 Real Estate Investment Trusts (REITs)

Real estate investment trusts, also known as REITs, are the easiest way to get involved in the residential and commercial real estate market. A REIT is a corporation that uses investors’ capital to buy and operate income properties, paying out a monthly or quarterly income from the profits. It is comparable to a dividend-paying stock.

#3 Home Ownership

Of course, the simplest and most effective way of growing your money is to purchase a residential property, from a semi-attached to an apartment, to live in for many years. Then, as you ignore the market noise and the peaks and valleys, you can take comfort that time is on your side and your home will appreciate in value as the years or decades go by. This is called home equity. Put simply; you invest for the long term.

Finally, if you are investing in real estate, be sure to consider these tips:

• Invest in good areas and neighbourhoods.
• Home in on a broad array of aspects other than cash flow, such as tax benefits, mortgage refinancing, and property value increases.
• Buy when the market is in a downturn rather than in a frenzy.
• Be sure to have a support team as you navigate the real estate market and the various rules and regulations.