Investment Property or Investment Portfolio: 5 Factors to Consider

1. Diversification

• Having multiple properties in the same geographic area can lead to concentration risk.
• If real estate values go down, it can have a negative effect across all your properties.

• With a diversified portfolio, you can minimize the risks by investing in different asset classes, regions and sectors.

2. Liquidity

• Not considered a liquid investment – may take months to sell – and once sold, could have a long closing period.
• During this time, property taxes, mortgages and other expenses still need to be paid.
• If you suddenly need to sell a property, this can be costly and you may need to reduce the price.
• Cannot sell a portion of a property.

• Generally highly liquid. For example, if you need to sell your funds, this can be done within two or three days with minimal to no cost (please refer to the fund's prospectus for more details on what selling costs may apply).
• Able to sell part of the portfolio.

3. Minimum Investment Required

• Relatively high.

• Low.

4. Tax Efficiency of Income¹

• Net rental income taxed as income (fully taxable).
• Dispositions can be taxed as income² or capital gains for non-principal residence.

• Distributions can include interest, dividend income, other income, capital gains and return of capital.
• Dispostions can be taxed as income² or capital gains for taxable investors.

5. Costs / Expenses

• Mortgage rates remain low, but if interest rates rise, that can have a significant impact on your monthly cash flow.
• If the property becomes vacant or is damaged, still have to pay mortgage / other costs.
• May manage on your own or need a firm to manage your properties, given the time and effort required.
• Can be unpredictable – management fees can cost 6%-12% of the monthly rental value³, which doesn’t include the ongoing maintenance of the home.
• Transaction costs approximately 4%-11%⁴.

• A fund’s Management Expense Ratio (MER) pays for the maintenance, rebalancing and ongoing advice received.
• Costs are known and can be found on the fund’s website or fund facts.
• Transaction costs usually zero to low.

What Can You Do?

A number of investors are choosing to invest in real estate often at the expense of building a diversified portfolio. But is it really the best solution at all times?

The important thing to remember is that a properly balanced portfolio can help mitigate risk, can also increase in value over the long term, all while costing less to manage compared to investing in real estate alone.

Your financial advisor can help determine where real estate fits in your overall portfolio – helping ensure that you’re not taking on too much debt, that your other goals aren’t impacted and that your portfolio is appropriately diversified.