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Why it can be a Good Strategy to Diversify Your Portfolio by Investing in Private Canadian Apartments

REITs Private Canadian Apartments

You’ve probably heard the saying “too much of a good thing is a bad thing”. Well, it’s something you actually need to think about when investing, or determining the best way to manage a financial portfolio. If you’ve ever learned about diversification, you know why. By diversifying your portfolio, or spreading your investments around, you limit your exposure to any one specific type of asset. Not only can branching out help when it comes to returns, but it is our opinion that it can also be used as a measure to possibly lessen risk. While there are numerous strategies and options for diversifying a portfolio, one of the approaches taken by some investors involves forgoing traditional asset classes in favour of real estate. In particular, real estate investment trusts (REITs) have become increasingly popular. Here is some background information on Private Canadian Apartments and REITs.

What are REITs?

First, it’s important to understand what a REIT is. Simply put, a REIT is when a pool of investors combines their equity to purchase a real estate asset. As a result, this real estate asset produces income for those invested.

Private Canadian REITs are different than public REITs. One of the biggest differences is that public REITs are listed on the stock market, making them more connected to market trends. In contrast, Private Canadian REITs are classified as Exempt Market Products, and are not listed on any public stock exchanges. As a result, they are not as connected to the market and are typically appraised based on the value of the actual real estate asset.

Possible Benefits of Investing in Private Canadian Apartments

Opportunity for Return

There is potential for Private Canadian Apartments to create returns in three ways:

  1. Cash flow from operations, such as rental income from tenants.
  2. Increases in equity. In the sense that tenant rents are used to pay the mortgage.
  3. Potential building value appreciation. As with any real estate asset, the ideal situation is that the property value will increase over time.

Smart investors know not to put all their eggs in one basket. When done right, diversification is an approach that can help yield better returns and mitigate risk. The key to diversifying is having a strategy and choosing your assets wisely. With the earlier points we’ve made, and more, there are a number of reasons to consider diversifying your portfolio by investing in Private Canadian Apartments. If this is something that interests you, or if you would like more information, reach out to speak with a financial representative today.

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Eric Roy, CFP
Eric Roy is a Certified Financial Planner and Cash Flow Specialist with over 15 years experience, renowned for his creative, innovative and competitive insurance and exempt market planning strategies.