"I get paralyzed each time I think of investing..." This is the response we got from a good friend/client who's been sitting on the fence and unsure if real estate investing is the right thing for her.
Allow us to share Jon's email in answer to her concerns...
"Hi. It's me, Jon. I know it could be nerve-wracking sometimes when one thinks of investing thousands of hard earned, hard saved money. Here are some points to ease your mind…
1. You park your money now maybe in savings or investment deposits, earning interest at bank rate or based on how the financial instruments perform. Remember, in 2008, investments lost up to 30% of it's face value & many people got hurt with their retirement savings dwindling in value when it was time to retire & they needed the funds the most. When one invests in a pre-construction property, all deposits are deposited (by law) in the lawyer's trust account. The builders cannot touch this money and they use their own funds & borrowed funds to use for construction. All deposits earn interest at normal bank rates, so it's as if it's in your own account sitting there, earning interest. All interest earned is credited to the buyer on closing.
2. Construction usually takes 3-4 years, sometimes even longer depending on the project & size of the building. Deposits are paid to the builders in installments. In some cases, the 20% deposit is payable within 2 yrs or longer. In this time, since historically, the prices have been increasing steadily at 5% per year, then the value of the investment may also have gone up 15-20%, therefore doubling the amount of the deposit.
3. There are many projects being offered in Toronto but not all are viable or highly marketable. This is why we study different offerings as to their location, price, future value & developments around the area. We select projects that we ourselves would buy into, meaning we would be willing to risk our own money ourselves. Most of the past completed projects, if not all, have given us & our clients good returns & profits.
Having stated the above, different people have different thresholds and appetites for risk. People also have various plans about retirement & slowing down so we completely understand if you are in this situation. Timing is essential when investing in anything. Investing should conform with all of your other plans & if it doesn't, it won't work, regardless how inviting the investments are.
Let us know if there is anything we can help you with, either in terms of information or other things. We are always here to assist…"