Real estate investors are in love with the city of Ottawa, and who can blame them? We really do have a unique market compared to other cities throughout the province. For starters, the market here is more stable, and properties tend to hold their value better than nearly anywhere else. That’s not to say that real estate prices don’t fluctuate depending on supply and demand. However, as Canada’s capital city, our economy is largely tied to government jobs and technology. With the nation’s largest tech park and the new Department of Defence in Kanata, our economic outlook remains positive.

For those looking to invest in real estate, it’s hard to beat a city like Ottawa. And now that you know where to invest, the next question is, what type of property should you look for? You’ll find an abundance of both residential and commercial opportunities. What’s the difference? 

Investing in Residential: The Pros and Cons

In the past, many residential investors turned to house flipping to grow their wealth. They’d buy a property, invest in some cosmetic enhancements, and then sell the house to an end user at a significant profit. When housing values were rising steadily, house flipping was an attractive (if not risky) opportunity for many people.

Things have changed since then. Housing values are unpredictable, and house flippers can no longer count on short-term profits. A property could rise in value one month and then drop the next. In addition, the government has introduced an anti-flipping tax to discourage the practice.

A long-term approach works best to succeed as an investor in today’s market. The ultimate goal is to find undervalued properties where you can generate rental income to carry the monthly costs. When you find the right opportunity, the benefits of residential real estate investing are plentiful:

• Generating passive income through rental payments
• Growing your equity as your property rises in value over the long-term
• The ability to sell the property at a profit within a few short years
• Holding the property as a potential vacation or retirement home 
• Creating generational wealth by bequeathing the home to your loved ones

What are the risks and disadvantages of investing in residential real estate? 

Real estate may be considered one of the safest investments, but nothing in life is entirely without risk. Many of the pitfalls of residential real estate come with being a landlord. Not everyone is cut out for the task, even if you’re lucky enough to find the world’s best tenant. And, of course, there is an element of financial risk.

• Real estate values can change, and you could lose equity in the short term if prices fall.
• Finding the right tenant takes time. In the meantime, you’ll have to cover the mortgage and other carrying costs without relying on rental income.
• A home you purchase might need more work than you first anticipated. 

All risks aside, investing in residential real estate can be a fantastic vehicle to grow your equity and net worth, especially when you are committed to the long term.

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Looking to buy your next property in or near Ottawa? The articles below will help simplify the process:

• What You Need to Know About Buying Out of Province
• Your Guide To Waterfront Properties In Ottawa
• The Pros & Cons Of Buying Pre-Construction

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The Pros and Cons of Commercial Real Estate

Commercial real estate entails any property not used for residential purposes. It could mean anything from office space, a storefront or a restaurant to warehouses or investing in vacant land for future development. What are the risks involved with commercial real estate?

• Since properties tend to be more expensive, there is a higher barrier to entry for investors.
• Banks typically require a higher down payment to finance the purchase of commercial buildings, which means you need even more capital to get started.
• Higher dollar amounts also mean higher risk if your investment does not go according to plan.
• It can take longer to find the right tenant to occupy your unit.
• Commercial real estate can be more complicated than residential, with more legalities and red tape to be aware of. Plus, you may need to manage more than one tenant at a time.

For some investors, the higher barrier to entry and increased risk are significant deterrents. If that’s the case, it may be best to start by investing in a residential property and then move on once you gain experience and confidence.

Other people thrive on the challenge! If you can weather the risks, commercial real estate offers many advantages:

• There is a higher potential for profits and a return on your investment. Commercial units typically command much more rental income than residential properties.
• You’ll have long-term tenants who generate steady income, year after year. Residential tenants come and go. However, a successful business owner is unlikely to want to leave when they have an established clientele. 

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Are you leaning towards commercial investing? Then you may find the following resources helpful:

• What Do Interest Rates Mean for Commercial Real Estate?
• How Ottawa’s Latest Developments will Impact Commercial Real Estate
• Do You Need a Commercial Agent to Sell a Commercial Building?

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Success is a Team Effort

Any well-managed investment can be successful, whether you decide to go for residential, commercial, or a combination of the two. The secret is to build a network of experts to guide you. Above all, an experienced real estate agent is an invaluable resource. Ideally, you want to work with someone local who understands the ins and outs of your area. And if you want the best of both worlds, look for an expert who knows both commercial and residential real estate.

After you break into the market, a property manager can take the hard work and stress away from maintaining your investment. With the right team by your side, you no longer need to worry about fielding midnight phone calls or last-minute disputes. Finding the right tenant, managing the relationship, and maintaining the building becomes their responsibility. All of this frees up your time for other things, including searching for your next venture!

Whether you’re looking for your next residential or commercial investment, we can help! West Ottawa Real Estate has served buyers, sellers, and investors since 1982, and we are happy to answer any questions you have. Reach out to team@westottawarealestate.ca or call 613-690-5993 to get started.

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