If you’re looking for financial freedom, safety, and comfort in your golden years, residential real estate investing might be right for you.
The BRRR strategy (buy, renovate, rent, refinance) is the most efficient approach to investing on a risk-reward basis because it provides the best returns with the least risk. The only downside to this strategy is that it requires at least a five to ten-year commitment to give the property a chance to grow in value. Let’s delve into why real estate investing might be a good option for you if you’re willing to be patient, and why working with experts will likely maximize your returns.
Why residential real estate?
If you’re like most Canadians, you’re probably concerned about inflation. And with good reason: Statistics Canada’s consumer price index rose at an annual pace of 4.8 percent in December 2021, the highest reading since 1991. Real estate investing is an excellent inflation hedge because the rise of the value of real estate assets is generally proportionate to levels of inflation. Unlike the stock market, real estate investing is less volatile, and its returns are often higher and less risky than mutual funds.
Robert Kiyosaki’s book Rich Dad, Poor Dad, which has sold more than 32 million copies in 40 languages, suggests that buying assets is the best way to build wealth. “The rich buy assets. The poor only have expenses. The middle class buy liabilities they think are assets,” writes Kiyosaki. According to Kiyosaki, an asset is anything that earns you money such as a rental property. A liability is anything that costs you money because its value drops over time such as a car.
When you buy an asset that appreciates over time and generates cash flow, your money starts working for you to create long-term security. With discipline, you can reach the point where your real estate investments make you more money than your job. That’s when continuing to work becomes a choice, rather than a necessity.
Why not invest in real estate on your own?
If you’re not an expert, real estate investing can seem intimidating and overwhelming. Choosing the right neighbourhood, the right property, and the right price can be challenging for novices. Once you purchase a property, you will need to coordinate the renovations, conduct tenant screenings and bookkeeping, and deal with maintenance issues. Collecting rents, arranging maintenance appointments, and answering after-hours tenant calls adds time and stress that you’re better off leaving for real estate experts to handle.
Luckily, there are ways for novice investors to establish strategic partnerships that allow both parties to mutually benefit from one another and build long-term wealth and financial security. Strategic partnerships are a safe way to invest in real estate because your partner has skin in the game. They are experts who also contribute their own capital and expertise to create the partnership. You might think that by going it alone, you’re sacrificing your time and comfort to save money. This is not usually the case, since expert research-based decisions regarding the choice of neighbourhood, property, price and renovations tend to maximize your returns.
Before diving into real estate, you need to discuss this with your significant other, if applicable, and determine whether you are willing to be in it for the long haul. The BRRRR method takes longer to execute, but that’s what makes it an investment with potentially high returns. If you aren’t prepared to wait a minimum of five years to recoup your initial investment, this is likely not the right investment for you. If you’re willing to be patient, real estate investing is the most effective way to build your wealth and give you the financial security that your pension might not provide.
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