Who Is A Real Estate Investor?

By Stephanie Baron, Realtor

Who do you imagine is a real estate investor?  Maybe you think this is an ultra-rich person who can afford to take risks with all their extra money. This isn’t necessarily true. 

Becoming a real estate investor, especially in our province, can be a reliable way to accumulate wealth - it’s not just available for the ultra-rich. In fact, becoming a real estate investor may be more available to you than you’ve imagined. Of course, you do need some savings. Depending on your goal, you may not need as much as you think. You will also need an experienced agent who can help you make the right investment.

Is it smart to invest in real estate?

Lucky for us, Winnipeg is a great city to invest in.  Compared to other cities, Winnipeg has been and continues to be a great city to be a real estate investor. Winnipeg is a “2% City.” In other words, if you own a property it will increase in value by 2% every year.  For example, if you buy a property for $100, 000 this year, it will be worth $102, 000 next year. This 2% annual increase is independent of house size, location or cost.  All properties are investments. Yes, even the property in which you live!  So if you own a house, you're already a real estate investor who is gaining wealth!

There are countless options for real estate investing.  Let’s look at the 3 most popular options.

How can I become a real estate investor? 

1: A Turnkey Rental Property

I’ve helped several clients buy ‘turnkey’ rental properties. Turnkey means little to no work is necessary before the property is rentable. This is a slow and steady way to build wealth.  Your wealth increases in two ways. First, your renter pays down your mortgage each month.  Second, your house increases in value by at least 2% each year.

This is a good option for investors who want to hold onto a property for a longer period of time, likely five years or more.

2: Land-Value Property

You might also consider investing in a house nearing its lifespan.  This house may have a lower monthly rental rate, but the real key is buying the property for close to land value. Land value means the property would be the same value without the current house on the property. Typically investors rent our these houses for a shorter period, between 1-2 years. The rental income pays down the mortgage until the investor can afford to tear down the house.  Now the investor has several opportunities.

They may build a house to sell or live in.   They may build a house with a secondary suite, allowing for 2 rental incomes.  Depending on the property, they may build 2 houses.  There are countless options. The key to investing in a Land-Value Property is twofold.  First, you must define your long-term goal.  Second, you must have an experienced agent who will help you make the correct investment.

3: Short-Term Rental Properties

In the last five years, we’ve seen an increase in investors purchasing homes as short-term rentals.  Short-term rentals are anywhere from 1 night to several months. Think AirBnB or VRBO. 

Short-term rentals can be condos in great locations like our exchange district.  They can also be typical family homes or cottages are also a great example of short-term rentals. Short-term rentals do not rely on a fixed monthly income, therefore, you may accumulate wealth quicker with a short-term rental.

For example, if you have a $100K house with a monthly rental income of $1K/month your annual rental income is $12K. If you used the property as a short-term AirBnB-type rental you may get $500/week.  If the house is frequently rented, your rental income increases tremendously.

There are important factors to consider with short-term rentals: The occupancy rate, cleaning, advertising, scheduling and management are a few examples.

Can you become rich by investing in real estate?

As you can imagine, there are countless ways to become a real estate investor in Winnipeg. You can consider lot splitting.  This means buying a property and splitting the land into two properties.  Now you've increased your wealth because you have two properties to either sell or build on.

If you know you want to become a real estate investor but you’re not sure where to begin, I have good news for you.  I have personally invested in each of the above options.  I have also worked with countless investors with all backgrounds.  Whether you are a first-time investor or you’ve been doing it for years, I can help you.  I have both the personal and professional experience necessary to expertly guide you.