Investing in real estate doesn’t mean you’re safe from the risks. As with any other type of investment, it’s important to evaluate the risks associated with investing in real estate. We’re taking a closer look at these risks in this next part of our blog post series to help you better understand what’s REAL in real estate investing.
Exempt real estate-based investments are sold to investors in the private placement market without a prospectus, without the review or approval of the British Columbia Securities Commission (BCSC) and, usually, without the advice of a registered dealer.
Examples of real estate-based securities include investments in:
- raw land held for resale to a developer in the future (sometimes referred to as “Land Banking”)
- a real estate development project
- a pool of commercial or residential rental properties (known as a Real Estate Investment Trust, or REIT)
- an interest in a pool of properties
- a pool of mortgages, such as a mortgage investment corporation (MIC)
- a single mortgage (syndicated mortgage)
What Risks do They Have?
Real estate securities sold in the exempt market have higher levels of risk than products such as GICs that may offer a lower rate of return.
You may not have a direct interest in the underlying real estate assets. As a result, you may not be able to take legal steps to seize and sell the assets or foreclose on the borrowers.
Investments in real estate-based securities are not guaranteed. You may lose all your money.
Finally, because exempt real estate-based securities sold by private companies are not publicly traded, the price you pay for your securities may not bear any relationship to the value of the underlying real estate-based assets.
There are also risks common to any exempt real estate-based security. To learn more about these risks, visit the Real Estate-Based Securities section of our High-Risk Investments page. You can also browse our newly launched webpage to learn more about Private Real Estate Investing.
If you have any concerns about a person or company offering an investment opportunity, please contact BCSC Inquiries at 604-899-6854 or 1-800-373-6393 or through e-mail at [email protected]. You can also file a complaint or submit a tip anonymously using BCSC’s online complaint form.
InvestRight.org is the British Columbia Securities Commission’s investor education website.
Learn about new 2020 CSA research on what investors know about fees and their investments, and how they interact with investment advisors.