With mortgage rates at historic lows, many investors, including some members of our Inner Circle service, are becoming more interested in Canadian real estate investing.

A house is the biggest investment and consumer purchase most of us ever make. The house itself is the consumer purchase; the land underneath is the investment. Your house depreciates as surely as your car, but more slowly. Eventually, a house reaches the end of its economic life. But the land it sits on is as functional as ever.

It pays to be skeptical of bargains in Canadian real estate investing

You should be wary of buying (or holding on to) bargain-priced homes. They can turn out like stocks that seem too good to be true. Well-informed homeowners may be eager to sell due to subtle changes going on nearby. Before you buy a house, walk through the neighbourhood and take a skeptical look at the people you see.

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Consider local employment trends. You can get a great deal on a house in a company town when the mine is running out of ore or the factory is losing out to foreign competition. The safest house to buy is near an area where job opportunities are diversified and growing.

As with stocks, value is key to successful Canadian real estate investing

To make the most profit from your home, look for high and/or improving land value. Some homes come with more land than the owner needs. You may one day be able to sell part of the land while holding on to the house. If you buy in the path of commercial or higher-density residential development, land value can eventually overwhelm the value of the house as a home. But beware of over-paying for land value, since development trends can change.

Real estate can entail higher risk than other investments

Owning real estate is much different than holding investments like stocks and mutual funds. It involves unique risks, such as rising crime, unpleasant neighbours and other changes in the neighbourhood of your property. These can make it hard to find buyers when you are ready to sell. So can physical problems, like nearby sinkholes, adverse traffic patterns, backed-up sewers and zoning changes that allow undesirable development, or limit what you can do with your property.

Most investors who have made profits in real estate did so by taking on a lot of risk, worry and work. They also went into it with realistic expectations and the intention of holding onto their properties for many years.

Many also owe at least part of their success to timing: they bought when real estate had been in the doldrums for years. If you buy at or near the end of a boom in prices, you may need to wait for a subsequent boom before you can sell at much of a profit.

There’s no telling whether or not prices will continue to rise over the next few months, but now is likely a good time for real estate investing, provided you understand the risk and work involved.