Ontario is likely one of the best places in Canada for investing in income property. Not only are housing prices more reasonable than places like British Columbia or Alberta, but employment opportunities make Ontario an attractive place to live. There are a variety of ways to get into real estate investment in Ontario, each offering varying levels of complexity, risk, and ease. Let’s take some time to consider the most common investment strategies in Ontario: buy-and-hold, flip, hybrid, and joint venture.
This strategy essentially refers to buying a rental property that is somewhat below market value and holding it until its value increases. You would aim to have rental income cover your mortgage so that you ultimately have a mortgage-free property on which you can continue to collect rental income indefinitely. This is a popular strategy for Ontario real estate investors because it is simple and straight-forward. Most of the risk involved revolves around getting high value tenants – those that pay their rent, stay for the long term, and adequately care for the property.
You’re probably familiar with this investment strategy as it’s becoming increasingly common and popularized in media. The goal here is to get a great deal on a “fixer upper,” renovate it, and sell it for a profit. Ontario is an old province, so these types of properties are plentiful, but not always appropriate. It can be difficult to assess how much work a property will require, so it can actually take you quite a long time to find the right fit. You also need to have the time and resources to renovate – and if anything unexpected comes up, you may diminish your profit margin. Still, with the right property, the potential for profit can be significant. Moreover, you won’t derive any income from these types of property until you sell, so it can be more difficult to get financing.
This third investment strategy is a combination of the buy-and-hold and flip strategies. First, you purchase a property that is undervalued because it requires some updating. You then make the necessary upgrades so that you can rent it in order to cover your mortgage payments. Eventually, when the market is in your favour, you can sell this property for a profit. With this type of investment, you just need to be clear about your financing needs as well as long-term goals.
As the strategy name suggests, a joint venture involves investing as a team. Especially if you haven’t got the funds to invest independently, this is a great option. Pool some partners together and invest in a property together. You’ll need to be carefully to get everything in writing including responsibilities for maintenance, tenant selection and management, and selling and profit distribution. While the joint venture is somewhat more complicated, it’s a good choice for those with limited capital who are also interested in real estate investment.