Real Estate Investing – Active and Passive Vehicles

Most of us want to participate in the wealth creating power of real estate. However, the problem starts at this point. How, where, and what type of real estate should I invest in are some of the questions that quickly bubble to the surface. Should I be a landlord or should I hire someone? The decisions become much easier once you consider a few key points.

What Is My Investing Goal?

Without oversimplifying – the battle is half completed once you have a clear understanding of what the final picture of your desired investing results will be. If you want to earn an additional thousand dollars a month in income – you only need to determine what your rate of return or monthly cash flow will be to find out your exact plan of action. In the example of cash flow – if the average rental unit yields $100 after the mortgage and expenses of the property – then you now know that you need to own ten of those units in whatever combination of properties you prefer to achieve your goal.

What Is My Preferred Investment Vehicle?

The next major hurdle to overcome is your preferred investment vehicle. The initial decision is whether you desire to become an active or passive real estate investor. Do you like the idea of completing your own due diligence, finding tenants and dealing with the property issues that arise from time to time? If so then you will find the following active vehicles for further exploration:

Active Vehicles

1) Direct Investment in Cash Flowing Income Property – This is where you and a team of professionals work to determine your ability to purchase single or multifamily properties for the sole purpose of having the tenant pay down the mortgage, cover the expenses, and an additional amount over and above for your efforts.

2) Direct Investment in Private Second Mortgages – This vehicle is one where you work with an Ontario Mortgage Broker to deploy your capital into secured loans against individual’s properties for the purpose of earning interest on your loan with a high likelihood of receiving your principle back after a year or two when the borrower’s situation improves.

For those who felt an instant compulsion to run the other way due to the feeling that you were taking on a second job – here are a couple of passive vehicles to enable you to participate in the returns available in real estate without the additional effort.

Passive Vehicles

1) Land Banking – In this vehicle, there is a company that specializes in purchasing land on the outskirts of growing cities for the purpose of taking land zoned agricultural through the rezoning process where the land then becomes worth up to ten times the amount and is ready for development. Investors do not earn income until the land is sold and then they receive back their principle back plus the interest component.

2) Syndicated Mortgage Investment – This is a process where a group of investors come together to fund the soft costs (sales and marketing) of a single larger development in order to assist in the successful sale of the units within the project. There is an ongoing dividend paid out monthly or quarterly and after the project is completed – the investors are paid out their principle plus a bonus.

Investing For Success

Regardless of the vehicle you ultimately choose to reach your financial goals – nothing is going to happen if you do not take action. Stepping out and learning more about your investment goals, reverse engineering the steps to reach them, and actively educating yourself about the different vehicles that are available today will bring you miles ahead of those who do nothing. Time is the great equalizer in investing and which side of it your money sits on can make all the difference between investing for success and being where you are today in five years. Let’s get started today – contact me below.