There are three main objectives for real estate investment: generating rental income, profiting from capital appreciation over time and improving margins through advantageous tax benefits.
Here are three different ways you can invest in property to get maximum investment returns:
Buy REITs (Real Estate Investment Trusts)
A REIT allows you to invest in property without owning the physical real estate. REITs are often compared to mutual funds in how they operate although they specifically own real estate assets such as office buildings, retail spaces, apartments and hotels. One of the reasons REITs are so popular among investors is that they tend to pay high dividends, making them attractive instruments for financing a retirement. Investors who don’t require a dividend income can automatically reinvest funds into the REIT to attract higher returns.
Although REITs are good investments, they can be varied and complex, which means you have to pay attention to the small print. Some REITs trade on an exchange, whereas others aren’t publicly traded at all and the choice you make can play a big part in how much risk you are exposing your capital to. Non-traded REITs aren’t as liquid as those that are on exchanges, which means you might struggle to sell them and they are harder to value. Publicly-traded REITs are a much safer bet and you can get involved by buying through a registered broker.
To do this, you’ll need to have a brokerage account, which takes just a few minutes to open. You’ll have to satisfy the ID verification process as part of compliance with money laundering legislation although you won’t have to make an initial investment when opening the account. Any REIT you choose to invest in will probably have a minimum amount you can invest which can vary.
Investing in a Primary Residence
Although it might not be our first priority, many people include their primary residence in their investment portfolios. Although you’ll be utilizing the asset through the years at some expense, it is also likely that its value is also increasing over time. If you borrowed funds on a mortgage to make the initial purchase, the amount of equity you hold in your own home should technically increase with every passing year.
However, it’s worth bearing in mind that price appreciation does not represent a return on your investment. The ROI on a property is most commonly viewed as the amount the property has increased in price since the original acquisition was made: in essence how much it is worth compared with what you paid for it. However, this approach does not include all of the expenses incurred when buying the property, living in it and preparing it for sale and so it is a little harder to establish an accurate ROI.
That said, your home is most probably among your most valuable assets and so it makes sense to understand how it performs. If you want to calculate an accurate ROI on your home, it’s best to start with the conservative approach, which you can always adjust afterwards to better suit your personal circumstances.
Here are some steps you can take to calculate the true ROI on the sale of your principal residence:
Calculate your acquisition costs when you bought the property, including deposit, legal fees, closing costs, taxes, etc.
Add up your total costs of ownership after breaking it down into subcategories for interest, taxes, insurance, repairs and maintenance. Also take into account any other expenses such as condo or community fees.
Total your selling costs to include agent fees, capital gains tax and local taxes, if applicable.
If you have a mortgage on the property, find out the redemption figure or alternatively use an amortization schedule tool online to calculate this yourself.
Become a Landlord of a Single Family Home
A single family home is a property that is an independent unit essentially rented to a single tenant. A single family home investment means that you get paid for what you own, rather than having to pay to own it. More often than not, investors buy properties in affordable localities or in need of refurb and revamp them to attract new tenants.
Perhaps the most attractive feature of investing in a single family rental home is that you have the liberty to determine your profits in many ways. Among the advantages are huge tax write-offs, a passive rental income and long term capital appreciation of real estate. Single family homes are among the most popular sectors in real estate investment, mainly because it is possible to make immediate returns due to the high demand for homes of this type.
Investors find real estate investment viable for many reasons, one of them being the stability of the market compared with other assets such as stocks or shares. Investors like tangible assets because they are straightforward, without the volatility of other opportunities. Although this also means real estate assets are less liquid, if you’re in it for the long haul, bricks and mortar represent the best potential for stable returns over short, medium and long term investment horizons.
We’ve mastered the art of buying and selling real estate in one of the world’s most sought-after property markets. Reach out today to diversify your real estate portfolio with our expert guidance, localised knowledge, discretion and world-class service—so you can achieve your real estate goals with complete ease.
