Owning real estate to diversify your investments

There are many different ways that you can own real estate to diversify your investment portfolio.  We like real estate because over time it is an investment that increases in value and gives the investor the opportunity to diversify and mitigate their risk of investments.  If you look at the figures for what your parents may have purchased your family home for and what it has sold or is worth today, it is easy to see how purchasing real estate could add real value and returns as an investment. There are many different ways that you can purchase real estate as an investment.

Ways to purchase real estate as an investment

  • purchasing a home, condo or apartment with the intent to rent
  • purchasing commercial real estate
  • purchasing land to re-sell or develop in the future
  • holding real estate specialty funds as part of your investment portfolio

We made the decision to purchase a property that we could hold onto and rent.  We have a diversified investment portfolio but it did not include real estate.  We chose to purchase property because it was a tangible investment and we know the real estate market where we live and saw opportunity to purchase here as a good investment.  That being said, it took two years for us to purchase a property that fit our criteria for ownership.

Our criteria for owning rental property

  • had to offer dual income of at least 2 rentals to reduce risk and provide cash flow
  • offer value and room to increase in value
  • low maitnance with a preference to all brick
  • located close to amenities
  • gas heating……no electric
  • on or close to the bus route
  • pass home inspection
  • appliances included would be a bonus

The property we purchased fit all of our criteria and was ready to rent immediately.  Two weeks after the home was ours and we had the keys, the main floor apartment was rented out.  We still had work to do on the basement apartment but within a few months we had the second unit rented out.  The property began providing additional cash flow after expenses.

Be prepared for challenges

Two years into owning the property we came upon some challenges when we had record rainfalls in the spring which caused some water leakage into the basement.  Most was contained to the laundry room but it did require us to have a sump pump installed and we made the decision to have the house waterproofed with blueskin installed around the exterior basement walls.  It was a costly investment but because our plan is to own the property until retirement it made sense and would offer peace of mind.   Other than that, we have not run into many other challenges.  We have had a wonderful relationship with our tenants and avoided many of the “horror” stories you hear from landlords about their experience in renting.

Tips for finding tenants

  • advertise well and include professional looking pictures in your ad
  • meet with prospective tenants by appointment and have them fill out an application
  • follow up with the application and use “google” as a tool to help screen
  • confirm employment and references
  • have a legal and comprehensive lease signed and in place
  • foster and develop a good relationship with your tenants

One of the best decisions that we made was making sure that we developed a good relationship with our tenants.  We also make a point to find out what they like and have a “welcome home” gift ready for them on move in day and make a point to drop off a gift during the Christmas season.  Keeping in touch and fostering a good relationship with our tenants has in turn benefited us with less worries and we are grateful to have tenants who take care of the property that we own.

Do you own rental property or are you interested in diversifying your investment portfolio with funds in real estate?  Drop us a line if you have questions and we would be happy to help.

Jeanette Ramnarine resides in Belleville, ON where she and her husband are co-owners of Forward Finances.  Her work and financial advice for families has appeared in various forms of media including newspaper, magazine, blogs and television.  She is a licensed insurance broker and investment advisor, bringing a unique and creative approach to her clients with her knowledge and expertise in estate planning and wealth preservation.


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