AGF Logo
  • Home
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Personal Finance
  • Français
  • AGF.com
  • InstarAGF.com
Skip to content
AGF logo
Insights and Market Perspectives
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Personal Finance
  • Contributors
  • Français
  • Search
Search
Close
Investment property or investment portfolio:  5 factors to consider

  • Personal Finance

For Print Only Logo
Insights and Market Perspectives

Investment property or investment portfolio: 5 factors to consider

Author: Sound Choices

July 12, 2018


The content in the below article is meant for Canadian investors only.


In this series of articles, we discuss how investing in real estate over equities is not as black and white as many people would believe. Today’s article addresses investment properties – what are the factors to consider?

Factor #1: Diversification

Investment PropertyInvestment Portfolio
Having multiple properties in the same geographic area can lead to concentration risk.With a diversified portfolio, you can minimize the risks by investing in different asset classes, regions and sectors.
If real estate values go down, it can have a negative effect across all your properties.

Factor #2: Liquidity 

Investment PropertyInvestment Portfolio
Not considered a liquid investment – may take months to sell – and once sold, could have a long closing period.Generally highly liquid and can be sold within two or three days with minimal to no cost.
During this time, property taxes, mortgages and other expenses still need to be paid.Able to sell part of the portfolio.
If you suddenly need to sell a property, this can be costly and you may need to reduce the price.
Cannot sell a portion of a property.

Factor #3: Minimum Investment Required

Investment PropertyInvestment Portfolio
Relatively highLow

Factor #4: Tax Efficiency of Income*

Investment PropertyInvestment Portfolio
Rental income taxed as income (fully taxable).Distributions can include interest, dividend income, other income, capital gains and return of capital.
Dispositions can be taxed as income** or capital gains for non-principal residenceDispostions can be taxed as income** or capital gains for non-principal residence

Factor #5: Costs / Expenses

Investment PropertyInvestment Portfolio
Mortgage rates remain low, but if interest rates rise, that can have a significant impact on your monthly cash flow.A fund’s Management Expense Ratio (MER) pays for the maintenance, rebalancing and ongoing advice received.
If the property becomes vacant or is damaged, still have to pay mortgage / other costs.Costs are known and can be found on the fund’s website or fund facts.
May manage on your own or need a firm to manage your properties, given the time and effort required.Transaction costs usually zero to low.
Can be unpredictable – management fees can cost 8%-12% of the rental income, which doesn’t include the ongoing maintenance of the home.
Transaction costs approximately 4%-6%.

The important thing to remember is that a properly balanced portfolio can help mitigate risk, can also increase in value over the long term, all while costing less to manage over investing in real estate alone.

 


Talk to your financial advisor today about which real estate investments make sense for your overall portfolio. And stay tuned for the next instalment in this series.


*Assumes a Canadian investor holding Canadian real estate/securities.
**If you are considered to be in the business of buying and selling property/securities, or recapture from claiming excess capital cost allowance.
The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2021 AGF Management Limited. All rights reserved.

Written by

Sound Choices

Sound Choices

More from Sound Choices

  • Personal Finance

2021 Financial Checklist

January 9, 2021

  • Personal Finance

The 411 on Distributions

December 10, 2020

  • Personal Finance

5 financial matters to check before year-end

December 7, 2020

  • Personal Finance

Unused RESP Savings – Use It Or Lose It?

October 19, 2020

Get perspectives straight to your inbox.

Subscribe now

More articles like this.

2021 Financial Checklist

  • Personal Finance

2021 Financial Checklist

Sound Choices | January 9, 2021

To better position yourself for financial success in 2021 and beyond, here are some top tips to consider.

Read More
The 411 on Distributions

  • Personal Finance

The 411 on Distributions

Sound Choices | December 10, 2020

Distributions are payments from a mutual fund to the investor and can derive from multiple sources, such as income and capital gains realized from securities held within the underlying funds, as well as return of capital.

Read More
5 financial matters to check before year-end

  • Personal Finance

5 financial matters to check before year-end

Sound Choices | December 7, 2020

Here are the top 5 items that could help make sure your financial matters are set up for 2021.

Read More
AGF Logo
Categories
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Personal Finance
  • Subscribe
Follow AGF

AGF Web Site Pages © 2021 AGF Management Limited. All rights reserved.

Links
  • Terms & Conditions
  • Privacy
  • Privacy For EU Residents
  • AGF.com
  • InstarAGF.com