First of all, "what is a real estate portfolio?"

It's a set of rental properties belonging to the same person or a group of persons in their own name or in a company. The real estate portfolio may include one or more buildings of different types, such as:

  • Rental house, duplex, multiplex
  • Land
  • Multi-housing
  • Rental condominiums
  • Commercial properties
  • Industrial rental properties

In addition, the real estate portfolio will be an integral part of the real estate assets of its owners. Thus, the net real estate wealth is calculated by subtracting from the value of the real estate assets [1], the amount of the real estate liabilities [2].

[1] All of the assets constitute an estate.
[2] Property liabilities consist of all property debts such as mortgages, maintenance and works expenses, tax debts, etc.

Besides buying real estate, are there other things to consider?

Certainly, and the first element that owners will underestimate is the management of the real estate portfolio. In addition to ensuring its physical maintenance to preserve its value, there are several other aspects to consider:

  • Management of tenants, complaints, problems
  • Collecting rent
  • Administrative management
  • Security
  • Profitability
  • Funding

What are the potential pitfalls?

There are many pitfalls to avoid when you are not surrounded by the right stakeholders. Of course, if you’ve read the previous articles you already know that your commercial mortgage broker is already aware of many of these potential pitfalls! The fact that he takes care of several other owners like you, he knows most of the issues they have experienced and above all, how they have handled the problems. By talking to your mortgage broker, you will avoid several pitfalls, including:

  • 1. Fiscal
  • 2. Undervaluation
  • 3. Ways to optimize and increase the value
  • 4. Financial aspects related to interest rate risk
  • 5. Management of unpaid rents
  • 6. Risks related to the environmental aspect
  • 7. Yield and profitability

There are several reasons why investors decide to go ahead and build a real estate portfolio. People are eager to increase their income and build a rich and diversified heritage. Thus, no matter how uncertain the future may be, those with a good real estate portfolio will be above all financial problems and will be able to enjoy a peaceful retirement without worrying if they have enough RRSPs, TFSAs, and bonds of all types, provided that the financial aspect and the indebtedness of its real estate portfolio are not neglected.

A few good tips before buying a building:

  • A good search to find the rare pearl to add to your lot with the help of an excellent commercial real estate broker. Keep in mind that the right property will attract the right tenants or the right buyers. So, localization will be key. Look for the good comparable in a given sector.
  • Look for properties in different sectors to diversify your risk.
  • Properly assess with the help of your commercial mortgage broker the economic value of the building.
  • Keep an eye out! Opportunities often arrive when you least expect them.
  • Maintenance, renovation, and repair are the triggers to increase the real estate and rental value. A great leverage tool for the next acquisition!
  • Think “optimization”. It's a quick way to create significant equity to propel you forward.

Of course, we aren't financial planners or wealth managers. However, your commercial mortgage broker will certainly be able to guide you well to achieve your dream of owning a beautiful, healthy and prosperous real estate portfolio.