The COVID-19 pandemic has proven a couple of things: not only is the multi-family residential sector resilient, it\u2019s probably the safest, if not smartest, bet for investors.<\/p>\n
And the clearest way to capitalize on it, according to Equiton Partners Inc.\u2019s Cliff Fraser, is as a passive investor because, in shouldering fewer responsibilities, it abets access to wider inventory.<\/p>\n
\u201cThe pandemic shone a light on what essential real estate really is\u2014which asset types perform well\u2014and people have figured out multi-family is great because everyone needs a place to live,\u201d said the chief business development officer of the Burlington, Ontario-based company. \u201cHistorically, it\u2019s been a resilient asset class, but even more so during the pandemic.<\/p>\n
\u201cThere are some limitations to day-to-day asset management, namely time, funds or cash, and then there are other daily responsibilities, like family and work. You can\u2019t grow your portfolio to become as big as you\u2019d like as a one-person shop, however, as a passive investor\u2014that is, by using an asset management company\u2014you can.\u201d<\/p>\n
Conversely, active real estate investors are responsible for finding investment properties and either conducting their own due diligence or hiring others who can, then going through the arduous underwriting process. Moreover, active investors typically tend to hyper-concentrate all their risk, and that could easily go awry.<\/p>\n
\u201cThe passive alternative some people might not know exists is relying on someone else to do the hard work and enjoying the benefits of the asset class with a lot less risk, and in a tax-efficient way,\u201d said Fraser. \u201cOne thing that people do is diversify risk by potentially investing in multiple asset types, so you spread out the concentration, and instead of doing the work yourself, you have experts doing it for you.\u201d<\/p>\n
The main way through which passive investing is tax efficient is the investor can use registered funds and, depending on how it\u2019s set up, isn\u2019t taxed immediately.<\/p>\n