How Real Estate Investors Raise Their Capital

Strategies for Affluent Investors in Barrie, Ontario

Whether you’re a doctor, lawyer, or business owner, building wealth through real estate can be a stable, smart and lucrative move. In the peak earning years of your profession, it is so important to plan ahead for whatever the future holds.

Real estate investment offers stability, tax advantages, and the opportunity for passive and appreciative income, making it an attractive strategy for high-net-worth individuals. We have advised many professionals on the value of real estate as part of a diversification strategy.

Timing is also very important, from building your credit rating as soon as you start working (which is critical) to when to divest in the future, such as taxation implications for retirement planning.

But how do seasoned investors raise the funds they need to seize these opportunities? In this blog, we’ll explore several ways some of our affluent investor clients have raised capital for their real estate investments. It involves leveraging their existing available cash and credit rating with traditional approaches to maximize growth and further diversify their portfolios.

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The Power of Leverage

In a previous Blog, we looked at the advantages of real estate versus the stock market and equities. Here’s a quick review.

Let’s say you have $100,000 to invest. You could purchase $100,000 worth of stocks. Alternatively, you can buy $400,000 in real estate with just a 25% down payment. (You might even be able to invest with less, but paying more upfront means you can avoid mortgage insurance and possibly obtain a better interest rate).

A $400,000 investment that appreciates at 6% a year as an average in a balanced market earns $24,000 annually. After one year, that property would be valued at $424,000.
If those stocks also appreciated by 6%, this would result in earnings of $6,000, bringing your total investment to a value of $106,000.

Either way, you’ve invested $100,000. However, your return was far greater in real estate. That is the power of leverage!

Want to know more about how real estate can help you grow your wealth? Check out our investor series below:

Leveraging Existing Properties

One of the most common ways to raise capital for new investments is by tapping into the equity of existing properties. This strategy is particularly effective for real estate investors who have owned property for several years. This is because their equity will have grown as a result of property appreciation and mortgage payments that pay down the original principle.

Home Equity Line of Credit (HELOC)

A HELOC is a flexible way to access funds using your home as collateral. Investors can borrow against the equity in their primary residence or an investment property, sometimes at a lower interest rate than other forms of borrowing. With a HELOC, you can access a revolving line of credit to fund new real estate acquisitions or renovations.

This is a popular way for real estate investors who want to grow their portfolios quickly without selling off existing assets. You then use what you have appreciated to build more wealth. Don’t forget that interest on the HELOC is also tax deductible from your primary income.

Cash-Out Refinancing

Another option is cash-out refinancing, where you refinance your mortgage for a higher amount than what you currently owe and take the difference as cash. This can be a great way to raise capital while keeping your existing investment intact. The cash can then be reinvested into another property or used for upgrades to increase value.

A dynamic community is just one of the reasons Barrie is a great place to invest. Learn more in the posts below:

Private Lenders and Syndications

For those who are looking for alternative sources of funding, private lenders and real estate syndications offer attractive opportunities.

Private Lenders

Private lending involves borrowing capital from individuals or groups of investors, often with more flexible terms than traditional banks. The major advantage of using private lenders is the ability to negotiate terms that work in your favour, especially if you have a proven track record of successful real estate investments.

Doctors, lawyers, and other professionals are in an excellent position to attract private lenders who may prefer to work with someone with a strong financial background and high creditworthiness. In fact, we have seen many of these professionals use each other in their own networks to raise capital. By building relationships with private investors or joining a network, you can access capital without the strict requirements and red tape of traditional banks.

Real Estate Syndications

Real estate syndication is a partnership where multiple investors pool their funds together to invest in larger projects, such as multi-family buildings or commercial real estate. As an affluent individual, you can act as a “sponsor” or “general partner” in a syndication, leading the project and securing funding from other accredited investors.

This strategy allows investors to access larger, potentially higher-return projects than they could finance on their own. Also, syndications often come with the advantage of professional management, reducing the time commitment for busy professionals who may not have the time to manage properties directly.

We have one example at The Weeks Group, where we helped a beginning investor buy their first few properties and attract a growing group of like-minded people to join them. Long story short, they now own over 1000 units as a syndicated venture.

Joint Ventures and Partnerships

Joint ventures (JVs) are another powerful way to raise capital for real estate investments. In a JV, you collaborate with other investors, often bringing complementary skills and resources to the table. For example, a high-net-worth person might partner with a more experienced real estate developer or property manager, using their capital to fund the project while leveraging the partner’s expertise in property management, development, or tenant relations.

For individuals with significant capital to invest, JVs provide an excellent opportunity to diversify into larger-scale real estate deals, such as apartment complexes, mixed-use developments, or even commercial properties. Not only do these types of ventures provide greater potential returns, but they also allow you to spread risk across multiple investors, reducing your exposure to any single investment.

Using RRSPs and TFSAs for Real Estate Investments

As a Canadian, you may consider using registered accounts like your RRSP (Registered Retirement Savings Plan).

Though traditionally used for stocks, bonds, and other financial instruments, you can also invest in real estate through a self-directed RRSP. This gives you the opportunity to invest in real estate directly or through private mortgages, limited partnerships, and real estate funds. The tax-deferred growth of an RRSP makes it a versatile tool for building wealth in real estate.

What should you look for in your next home or investment property? The posts below will give you some ideas:

Bank Loans for Real Estate Investors

While many affluent investors prefer to use private sources for capital, government-backed initiatives recently announced that traditional mortgages are still viable options for raising funds for real estate investments. With strong credit and substantial assets, doctors, lawyers, and other professionals can secure favourable loan terms from the banks and possibly the Canadian Mortgage and Housing Corporation (CMHC).

The key to successfully leveraging traditional loans is understanding the nuances of financing, including how banks treat different property types (residential, commercial, or multi-family). Working with an experienced Realtor, mortgage broker, and financial advisor can help you navigate these options and access the capital needed for your next big project.

Real estate investment is an effective wealth-building tool that can provide financial security, tax advantages, and long-term growth. For affluent individuals working with The Weeks Group in Barrie, Ontario, the opportunities are endless!

By leveraging existing assets, partnering with others, and taking advantage of tax-efficient investment vehicles, you can continue to grow your portfolio and build wealth for the future. The key is to stay informed, work with trusted professionals, and ensure that each investment decision aligns with your long-term financial goals. At The Weeks Group, we have a wealth of experience and knowledge in helping investors like you navigate Barrie’s real estate market.

Do you want to learn more about how to raise capital for your next investment or to explore current opportunities? Our team is here to help you every step of the way. Reach out to us today at 705.305.4174 or email hello@weeksgroup.ca for more information.

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How Real Estate Investors Raise Their Capital

The Power of Leverage