Let’s talk about some real estate investment properties you will likely encounter on your investment journey, and you’ll want to become an expert in one or two of these property types. Anymore and you’re likely to be stretching yourself too thin.
As we go over each property type, keep these five questions in mind:
1) Where can I locate properties like this?
2) How can I finance such properties?
3) How can I benefit from assets like this?
4) What are my exit strategies for properties like this?
5) Are there any hidden fees for homes like this?
Types of real estate investment properties are as enumerated below
1. Single Family Homes:
Single-family homes are the foundation of many communities across Canada. They can contribute to a solid, cash-flowing real estate asset base. They are plentiful, easy to finance, and sell quickly in almost any market. The disadvantage is the inability to generate significant cash flow, particularly in higher-priced urban markets such as Toronto and Vancouver.
2. Student Rental Properties:
Mostly, you can have three to eight students in a house, each paying $300 to $650 per month. As a result, these properties generate a lot of cash. Maintenance will be slightly higher than on a single-family home, and proper insurance requirements must be met, but a steady supply of hungry tenants (literally!) can offset these other challenges.
3. Duplexes & Triplexes:
These are usually single-family structures that can accommodate two or three families. The main advantage is that if one family leaves, there are two others who will pay the rent. The main consideration is to ensure that these properties are “conforming,” meaning they should comply with local bylaws for things like utility meters, entrances/exits, and parking.
4. Small Multi-Unit Apartments:
A six-plex or an eightplex is a small building with no elevators and above-ground parking that is usually managed by the owners. Commercial financing for this type of property can be obtained, making it an appealing investment. Instead of your personal debt service ratios, financing can be obtained based on the building’s capitalization rate.
5. Large Multi-Unit Apartments:
Consider six-story or higher structures with ten or more units per floor, typically managed by property management as well as an “on-site superintendent” to handle day-to-day business operations. This is a commercial property, and it is one of the few types of commercial real estate that CMHC will insure up to 85 percent loan to value. You can buy this type of property with a 15% down payment. Are there any extra costs? Yes, large expenses such as underground garage repairs or balcony renovations. This is regarded as one of the safest and most conservative commercial real estate investments.
6. Strip Malls:
Consider a mall with a Tim Horton’s on every corner, a grocery store as the anchor tenant, and a slew of convenience stores, clothing stores, nail salons, and family doctor’s offices. These can provide years of consistent cash flow if occupied by reliable tenants. However, many of these shopping centers are made up of small businesses with unproven business models. As a result, banks require significant down payments, typically of 35 percent or more, even with a Grade-A business like Tim Hortons as one of the tenants. Unless you have deep pockets and a proven track record, financing for a business-like Tim Hortons can be difficult to secure.
7. Office Buildings:
These are typically owned by large real estate holding companies, similar to strip malls. Building from the ground up necessitates city zoning approval and long-term leases from anchor tenants. Financing is difficult to obtain in the absence of a proven business plan backed by a strong balance sheet.
8. Industrial Property:
A warehouse can be a very profitable investment. A single tenant may rent out a large warehouse and only use a portion of the space, greatly reducing wear and tear on the property. Often, industrial space is built on land that can be subdivided and used to build more buildings.
Purchasing land has resulted in some of the most significant fortunes. You’ll need deep pockets and tenacity, but the rewards can be enormous. Investors frequently purchase large tracts of land well in advance of urban sprawl. Land is sold off for residential subdivisions and commercial office parks as development progresses.
10. Cottages and Vacation property:
Investing in a vacation property can be a great way to diversify and grow your real estate investment. Especially with 2020 pandemic experience where a lot of people where grounded. Most people shifted to vacation homes where they were able to ease the stress of the global restriction. The Con of diving into this investment is due to soaring prices and bidding wars on this property. It could also be very expensive to maintenance.
As you can tell, there are a wide range of real estate investment properties or opportunities available for multi-unit apartment complexes, from hundreds of thousands of dollars for single family homes to millions of dollars. There are massive cash flow and profit opportunities within these properties, which is why real estate investment can be so exciting and so distractive!
As you consider the various types of real estate investment properties, make your decision carefully. Remember that you are not limited to one sort of investment; I use a variety of real estate investing tactics to diversify my assets and passive income streams.