Remember Your Home in Your Investment Portfolio

Real Estate

During RRSP season (which this year closes out on March 3) there is always heightened scrutiny placed on your investment portfolio and on the performance of your retirement savings plan.  But are you really looking at the whole picture?

What kind of investments do you have? Are you pleased with your returns? Are you sufficiently diversified that you are mitigating against different kinds of risk? Do the investments that you have match your time horizon? (i.e. your goals, when you’d like to access your return on your investment, your risk tolerance, etc.).

While you may view your investment portfolio based on what you see on your bank/investment holding statement, there are a few omissions, which are noteworthy building blocks to a secure retirement.

Your Property Has a Place in Your Portfolio

While you may look at your Home as your spot to lay your roots, and more basically your shelter, it serves another larger purpose.

Your property (including your principal residence and any investment property that you have) actually comprise part of your overall investment portfolio.

Also, chances are that investment is actually leveraged. What that means is that you likely hold a mortgage loan against the property- which ultimately means that you are subject and vulnerable to fluctuations in interest rates in paying back that loan. This is something that most people overlook when trying guard themselves against different types of risk (interest rates being one, volatility in equity markets another).

How and When Does it Grow?

The assumption is that, the asset value of your home will grow over time. This holds true over the long term with real estate. Although real estate, like all investments, is not bullet proof.  The Achilles heel for real estate takes a couple of forms, but mostly presents in short term market corrections that quickly erode the current value of a property.

On paper, this does not mean panic and alarm though, because in real estate slow and steady wins the race.

However, for an investor who has mismatched their time horizon to their property investment, or who was trying to time the market to make a quick buck, this can spell disaster.

The gap between what you paid, what you own and possibly what you owe (think back to the subprime crisis in the U.S., from which some markets are still reeling) can grow to be deep and wide.

While history does show that real estate is a valuable asset to buy, much of the growth is realized in the hold component.  This is an investment where prudence, due diligence, and longer term time horizon will contribute heavily to the likelihood of realizing big gains on your investment.

Hot Market = Big Returns

While the lurch and pull of the equity markets may make the perceived “sturdiness” of a bricks and mortar investment more appealing, be aware that there are risks inherent in property investment as well. How can that be, you ask, in a city like Toronto, where prices, and assumedly your asset value alongside, just keep climbing?

There are vulnerabilities, to be sure, albeit more subtle in presence than those appearing on the stock ticker. Urbaneer has long contended that due diligence, good advice and uniqueness in a property purchase is an investor’s secret weapon to preserving and growing the return on investment.

Yes, you are an Investor, by virtue of being a property owner. But try to think down the road through the eyes of the Buyer – who will ultimately help you realize the return on your investment.

It all comes down to the mechanics of supply and demand. In the context of this dynamic market, what this means is that if you hold a property that is in huge supply (i.e. one of the numerous super high-rise condominiums, that continue to populate the skyline and will re-populate the resale market in coming years), your likelihood of garnering top dollar may be less, because you may be shoulder to shoulder with numerous other sellers with similar properties. This can dilute the market, asking prices and ultimately the return on your investment.

If you have a character dwell, surrounded with asset supportive amenities like shopping, access to public transit and green space, your investment inherently possesses considerate upside.

Wondering about the investment value of owning a property for residence or for asset growth? Urbaneer has decades of experience in understanding and navigating the market, along with a proven record of matching the right property with the right person. Let us help you translate our experience into wise property purchases for you, with a no-pressure approach.

We’re here to earn your trust, then your business.

~ The Urbaneer Team
Bosley Real Estate Ltd., Brokerage
(416) 322-8000 •

Real Estate

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