With elevated interest rates and persistently high home prices, American homebuyers have felt firsthand the squeeze on their budgets.
According to real estate mogul Grant Cardone, the necessity for substantially longer mortgage terms is on the horizon.
“The savior of America will not be lower prices, it will be longer mortgages,” he said in a recent TikTok video. “In your lifetime, you will see mortgages go from 30 to 40, 50 and maybe even 60 years. You could, if you live long enough, see a 100-year mortgage in America.”
Don’t miss
Despite this, Cardone expresses skepticism about the role of mortgages in achieving true home ownership.
“A mortgage is just a fancy way to say you own some sh-t that you don’t own,” he explained.
Looking ahead, Cardone anticipates a significant shift in lifestyle and consumption patterns. He sees a future where renting becomes the norm across various aspects of life.
“America will become a renter nation,” he predicted. “You will rent your cars, you will rent where you live, you might even rent your clothes in the future.”
But what if you’re still keen on investing in real estate, considering its reputation as a hedge against inflation, a source of passive income and a way to diversify your portfolio?
Well, despite the current economic challenges, there are indeed strategies to invest in real estate that don’t involve taking on substantial debt. Here’s a look at three of them.
Invest in publicly traded REITs
Real estate investment trusts, or REITs, are companies that own income-producing real estate like apartment buildings, shopping centers and office towers.
You can think of a REIT as a giant landlord: It owns a large number of properties, collects rent from tenants, and passes that rent to shareholders in the form of regular dividend payments.
To qualify as a REIT, a company must pay out at least 90% of its taxable income to shareholders as dividends each year. In exchange, REITs pay little to no income tax at the corporate level.
It’s easy to invest in REITs because many are publicly traded.
Unlike buying a house — where transactions can take weeks and even months to close — you can buy or sell shares in a REIT anytime you want throughout the trading day. That makes them one of the most liquid real estate investment options available.
Also, your investment can be as little or as large as you want — be it $100 or $100,000. While buying a house usually requires a hefty down payment and a mortgage, you can invest in a REIT with as little as the price of a single share and brokerage fees.
Invest on a crowdfunding platform
Crowdfunding has become a buzzword in recent years. It refers to the practice of funding a project by raising small amounts of money from a large number of people.
These days, many crowdfunding investing platforms allow you to own a percentage of physical real estate — from rental properties and commercial buildings to parcels of land.
Read more: Worried about the economy? Here are the best shock-proof assets for your portfolio. (They’re all outside of the stock market.)
Because of the greater risks involved in real estate crowdfunding, some platforms are targeted at accredited investors, sometimes with minimum investments that can reach into the tens of thousands of dollars. To be an accredited investor, you need to have a net worth of over $1 million or an earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the past two years.
If you are not an accredited investor, many platforms let you invest small sums if you like — even $100.
Such platforms make real estate investing more accessible to the general public by simplifying the process and lowering the barriers to entry.
Crowdfunding platforms and sponsors of real estate deals usually charge investors some fees.
Invest in ETFs
Picking the right REIT or crowdfunded deal requires plenty of due diligence on your part. If you are looking for an easier, more diversified way to invest in real estate, consider exchange-traded funds.
You can think of an ETF as a portfolio of stocks. And as the name suggests, ETFs trade on major exchanges, making them convenient to buy and sell.
Investors use ETFs to gain access to a diversified portfolio. You don’t need to worry about which stocks to buy and sell. Some ETFs passively track an index, while others are actively managed. They all charge a fee — referred to as the management expense ratio — in exchange for managing the fund.
The Vanguard Real Estate ETF (VNQ), for example, provides investors with broad exposure to U.S. REITs. The fund holds 160 stocks and has total net assets of $54 billion. Over the past 10 years, VNQ has delivered an average annual return of 6.4%. Its management expense ratio is 0.12%.
You can also check out the Real Estate Select Sector SPDR Fund (XLRE), which aims to replicate the real estate sector of the S&P 500 Index. It currently has 31 holdings and has an expense ratio of 0.10%. Since the fund’s inception in October 2015, it has delivered an average annual return of 6.2%.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
