{"id":1511,"date":"2020-09-02T12:38:27","date_gmt":"2020-09-02T16:38:27","guid":{"rendered":"https:\/\/cli-mu.qarea.org\/investors\/?p=1511"},"modified":"2023-05-17T16:18:36","modified_gmt":"2023-05-17T20:18:36","slug":"mortgage-investing-in-the-era-of-covid-19","status":"publish","type":"post","link":"https:\/\/staging.canadianlending.ca\/investors\/mortgage-investing-in-the-era-of-covid-19\/","title":{"rendered":"Mortgage Investing in the era of COVID-19"},"content":{"rendered":"

Managing your investment portfolio can be complicated at the best of times. When we encounter uncertain markets and quickly evolving economic times, investment decisions become much more complex.\u00a0<\/span><\/p>\n

When it comes to deciding between mortgage and real estate investing, whether you are a seasoned investor or one just starting out, there are many things you need to consider to determine which of these best suits your needs.<\/span><\/p>\n

Mortgage Investing vs. Real Estate Investing<\/b><\/h3>\n

Real Estate Investing Basics<\/b><\/p>\n

Many investors are familiar with the concept of real estate investing. This usually involves working with a real estate professional to find investment properties \u2013 both residential and commercial – you can purchase and then rent\/lease to derive income and capital gains.<\/span><\/p>\n

Real estate investors are involved in most aspects of the real estate transaction, including but not limited to finding and purchasing an investment property. Besides a real estate agent, you will also need to work with a real estate lawyer to close the purchase, a mortgage broker or a lender to provide mortgage financing, and a property management company to find renters for your property as well as deal with any other day-to-day issues and maintenance.<\/span><\/p>\n

In the realm of investment portfolios, real estate is considered to be an \u2018alternative investment\u2019 since it doesn\u2019t comprise one of the three traditional asset classes of stocks, bonds and cash. Alternatives have significantly grown in popularity in recent years as investors continue to seek out products that aren\u2019t correlated with public markets and hence aren\u2019t prone to the volatility or diminished returns these markets have become associated with.<\/span><\/p>\n

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Real Estate Investments are Hands-on<\/b><\/p>\n

Real estate is very much a hands-on transaction for most investors. In addition to the time investment required for sourcing the right opportunity and being responsible for managing it, there are many financial obligations, beyond the initial down payment, that investors are responsible for, including regular mortgage payments, property taxes, utilities and repairs. And although investors stand to benefit all the capital gains that come with property ownership over time, they are also on the hook for any losses.\u00a0<\/span><\/p>\n

It\u2019s clear then that real estate investing can be fairly complicated, expensive and time-consuming, particularly when you first start out or when you own multiple properties simultaneously. So why are so many people jumping on the real estate investment bandwagon?<\/span><\/p>\n

This is easy to answer, the Canadian real estate market has proven to be an appreciating asset that has been consistently increasing in value over the past 20 years. While other investments, such as stocks, have been more volatile, with higher highs and lower lows, the real estate market has been on a steady incline. While appreciation of real estate is a function of many factors including the property\u2019s location, since real estate is a finite resource (we can\u2019t create any more land, at least not to any substantial degree) it often, at minimum, retains its value while also providing a tangible asset for investors.<\/span><\/p>\n

Benefits of Mortgage Investing<\/b><\/h3>\n

To put it bluntly, mortgage investing is a simpler, more hands-off,\u00a0 version of purchasing an investment property. It involves working directly with a mortgage lender, who is responsible for matching your investment capital, risk profile and return goals, with the mortgage financing needs of qualified borrowers.<\/span><\/p>\n

Mortgage investing eliminates the need to purchase a home and the requisite time, effort and costs that go along with that. By providing borrowers with the mortgage financing they need, investors can participate in the real estate market, and help their fellow countryman, without having to actually own property.<\/span><\/p>\n

Other than the purchase itself, there are many similarities between these two modes of real estate investing. That said, one of the major benefits of mortgage investing is that the mortgage lender you work with can facilitate and take care of most if not the entire process for you.<\/span><\/p>\n

From having dedicated legal professionals on retainer to in-house mortgage origination and servicing departments capable of taking care of all your administrative requirements, professional mortgage lending firms can offer investors a simpler solution to investing in real estate.\u00a0<\/span><\/p>\n

In many ways, mortgage investing provides the best of both worlds for investors \u2013 direct exposure to the real estate market without the costs, complexity and risks that come with property ownership.<\/span><\/p>\n

Indeed, reducing risk is a key benefit of mortgage investing, making it an attractive opportunity relative to direct real estate ownership. With mortgage financing, investors are protected by collateral security, which is a key component of this product. If the borrower defaults on their mortgage or refuses to make their payments, the mortgage investor can ultimately sell the property to recoup their capital.<\/span><\/p>\n

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Real Estate Investing and COVID<\/b><\/h3>\n

While real estate investing has always had its challenges, these are further amplified by the pandemic. Indeed, managing real estate investments and collecting rents in the midst of a global pandemic has proven difficult for a variety of reasons.<\/span><\/p>\n

With the world dealing with the many changes to our daily lives, along with the economic fallout from COVID-19, real estate investors have their hands full trying to manage their properties. The following highlights some of the key challenges facing real estate investors:<\/span><\/p>\n