Top 5 Real Estate Investment Strategies for Long Term Wealth

Real estate has long been a cornerstone of wealth creation in Canada, and for good reason. It offers stability, the potential for consistent returns, and the satisfaction of building and owning something tangible. However, success in real estate requires a clear understanding of your investment objectives and the various strategies available. But with so many options available, where do inventors even begin?

What are Your Investment Goals?

Before diving into real estate, it's essential to define your investment goals. Your objectives will determine which real estate strategies align with your needs and help you achieve your financial aspirations. Here are some key goals to consider:

• Income Generation: If your primary goal is to create a steady income stream, look for investments that provide regular cash flow. This often involves rental properties or investments that yield consistent returns.

• Capital Appreciation: For those focused on long-term growth, investing in properties that are likely to increase in value over time can be advantageous. This strategy may involve purchasing properties in up-and-coming neighborhoods or investing in new developments.

• Short-Term Gains: If you’re seeking quicker returns, consider strategies that involve buying properties at a lower price, improving them, and selling them at a profit. This approach typically requires more active involvement and a deeper understanding of market dynamics.

• Diversification: Adding real estate to your investment portfolio can help diversify your assets, reducing overall risk and balancing out the performance of other investments like stocks and bonds.

There’s a path for every investor profile. Understanding your goals will guide you in selecting the most suitable real estate investment options. Here’s our pick for the top five proven investment strategies (from personal experience), each catering to different risk appetites and involvement levels to build a secure financial future through real estate.

1. Rental Properties through BRRRR: Amplifying Your Returns While Freeing Up Capital

For those seeking steady returns & appreciation, long-term rental properties are a classic choice. The BRRRR method (Buy, Renovate, Refinance, Rent, Repeat) is a popular strategy for generating wealth through real estate. It involves acquiring a “TLC-requiring” property, renovating it to increase its value, refinancing to recoup your investment (plus some profit in some instances), renting it out for cash flow and repeating the process, leveraging equity from the previous investment properties.  This offers a trifecta of benefits: steady rental income, property value appreciation, and the power of debt to amplify your returns.

While BRRRR’s are traditionally applied to single-family homes,  focusing on multi-unit properties like duplexes, triplexes, or small apartment buildings offers several advantages and opportunities for far greater returns for investors.  However, BRRRR requires active involvement and significant time, particularly in the initial stages so a physician investor with limited time can consider partnering with a trustworthy and experienced joint venture partner (sweat equity partner) to guide in the selection process, lead the development & refinance process, and share the responsibilities of property management. Joint ventures can be structured in many ways - make sure an iron-clad and lawyer stamped agreement is in place. Medvisory has joint-ventured with several physician investors interested in learning the ropes and dipping their feet in real estate investing. See a select example from our portfolio of projects: Portfolio | Medvisory.

2. Private Mortgages: Becoming the Bank and Earning High Yields

For investors seeking a more passive approach, private lending offers an alternative way to invest in real estate without the responsibilities of property management and all the expenses that come with owning a home.

Here, you act as the bank, providing loans to borrowers who may not qualify for traditional mortgages with A lenders.  The investment period is relatively short term (1 year) and this strategy has the potential for attractive returns,  often exceeding those of traditional investments, albeit with added risk.  However, careful due diligence is crucial. An organization like Medvisory Inc, partners with reputable mortgage brokers, lawyers and real estate professionals who can help you identify qualified deals (quality borrowers, lower LTV ratios backed by sound appraisals) and structure secure loan agreements,  mitigating the risks associated with lending your own capital. We also structure deals with multiple physician lenders, so you are never concentrating your equity in any one deal and can diversify your portfolio even within this asset class. Lastly, you are investing with Medvisory and a tight-knit group of physician investors, not through Medvisory. You have a lean against the property for your portion of the investment and Medvisory has skin in the game too, so we can track the deal from initiation through to mortgage payout. Plus, with the right set-up, you can invest with registered funds (RRSPs, TFSAs).

3. Rental Properties through Buy-and-Hold: Waiting on Long-Term Appreciation

The buy-and-hold strategy is a well-established approach for investors seeking to capitalize on Toronto's long-term real estate appreciation.  This involves purchasing stable, well-maintained income properties (single family & multiplexes) in promising locations with steady tenant demand that you hold onto for several years. While initial investment might be higher, passive income and long-term value growth can be significant. 

Over time, you benefit from rental income and the potential for significant appreciation when you eventually sell.  This approach is much less hands-on than BRRRR but requires careful property selection to ensure a reliable tenant base and minimize maintenance headaches. You need a real estate team, like Medvisory,  that specializes in identifying good investment properties.

4. Vacation Rentals: Capitalizing on Toronto's Tourist Market

Toronto's vibrant tourism industry makes vacation rentals a tempting option for some investors, providing both personal enjoyment and financial returns. This strategy involves acquiring a property in a popular tourist destination and renting it out to short-term guests.  Investors can capitalize on seasonal demand and generate significant rental income during peak travel periods and throughout the year through platforms like Airbnb and VRBO.

However, success hinges on thorough market research and property management, especially in a competitive market like Toronto's. Consider factors like proximity to attractions and short-term rental regulations before diving in.

5. REITs: Working the Hands-Off Approach with Steady Income

Real Estate Investment Trusts (REITs) are essentially companies that own and operate income-producing real estate portfolios.  It offers a low-maintenance means to create a diversified basket of properties across different sectors (residential, commercial, etc.) without the burdens of direct ownership.  

While offering lower individual control, REITs can be a good option for investors seeking a balanced portfolio with reduced management responsibilities. Unlike individual properties, REITs are highly liquid and can be easily bought and sold on stock exchanges.  REITs  typically pay out regular dividends, providing a steady stream of income that can supplement your existing investments and contribute to your long-term financial goals.

BONUS TIP! House Hacking: Monetizing Your Space

House hacking offers a creative way for young investors or those new to the Toronto real estate market to enter the game.  This strategy involves renting out a portion of one's primary residence or purchasing a multi-unit property and living in one unit while renting out the others.  By using rental income to offset your mortgage and other expenses and potentially help you qualify for the mortgage itself, house hacking allows you to build equity in a property while reducing your living costs.  This is a fantastic way to gain experience in property management and build a foundation for future investment opportunities. Additionally, homeowners may benefit from tax advantages associated with rental property ownership.

Why Should You Add Real Estate to Your Portfolio?

Incorporating real estate into your investment portfolio offers numerous benefits. It provides essential diversification, helping to reduce overall risk by balancing the performance of other asset classes such as stocks and bonds. Additionally, real estate can generate consistent income through rental properties and deliver capital gains as property values appreciate over time.

By selecting the right investment strategy that aligns with your goals, risk tolerance, and time horizon, real estate can be a powerful vehicle for building long-term financial stability and growth. Thorough research, sound financial planning, and a long-term perspective are the cornerstones of success in the dynamic Toronto real estate market.

With the right approach, Toronto's thriving real estate market offers significant potential to build lasting wealth and secure your financial future. Start your journey with Medvisory Inc. today!