4 Reasons to invest with Lotly instead of buying a rental property

4 Reasons to invest with Lotly instead of buying a rental property

Last updated
May 2022
5 min read
Written by
Grace Du
  • Real estate investing has long been one of the gold standards for wealth generation, typically in the form of owning rental properties. 
  • With Lotly’s shared equity model, you can invest in a property without taking on the mortgage or having to concern yourself with monthly expenses, landlordship, and more.
  • By investing in a homebuyer’s primary residence, you benefit from the power of leverage all while helping to build a better community where both investors & homeowners can win.

Investing in real estate has proven to be one of the best ways to build wealth over time. The traditional approach is to own rental properties. You not only benefit from the growth of property values, but also consistent cash flow when the property is rented out to tenants. 

At Lotly, we take a different approach towards real estate investing. Instead of investing in rental properties, we connect you with aspiring homeowners and allow you to invest in their homes. 

Wondering how Lotly investing is different from traditional investing? Or why should somebody consider Lotly investing over a rental property? Keep reading.

1. You can benefit from a mortgage without taking on the mortgage yourself.

Lotly investments require a down payment of 20%. The other 80% is financed by a mortgage loan. By buying properties with only one-fifth of the money out of pocket, you benefit from a higher return-on-investment because of the 5x leverage

But unlike buying a rental property, where you have to go through the hassles of getting approved for a mortgage yourself, with Lotly investments the mortgage is held by the homeowner, same as with a normal home purchase. You have no liability for the loan whatsoever … so you get to enjoy all the benefits of a mortgage without even taking one.

2. You get to invest in prime real estate markets without paying monthly expenses.

Many investors choose to invest in rental properties because it produces a consistent cash flow every month in the form of rental income. However, with housing prices soaring in Ontario, finding a property with sufficient income potential has become a distant dream. 

Achieving positive cash flow has become next to impossible because the market rent is no longer enough to cover mortgage and other costs. This is especially true in prime real estate markets where home values have been growing the fastest in the past few years (see table below).

Lotly investing is different from rental property investing because as the investor, you are betting on the continued appreciation of real estate. Your investment acts to assist with the down payment, with no extra monthly expense. This allows you to invest in prime real estate markets without bleeding cash every month.

3. No more property management headaches.

Owning rental property also means that you need to maintain it over time. This is not easy. If you were to do it yourself, you need to find good tenants, deal with maintenance issues, and make sure all the monthly bills are paid on time. 

If that sounds too much trouble, your other option is to hire a property manager. It may be convenient, but it will eat into your profits. The average property management service fee is 7-8 % of the total rent … and you’re still on the hook for maintenance and other costs. 

Furthermore, rental property management suffers from a built-in challenge that is almost impossible to eliminate — the misaligned interests of landlord and tenant. As a landlord, you hope the tenants will take care of the property as if it were their own. Tenants, on the other hand, have little incentive to do so because they have no skin in the game. 

At Lotly, investors and homeowners are on the same team. Homeowners also contribute to the down payment, meaning they too will benefit if the property is well maintained and goes up in value. They have the mentality of a true homeowner, with every incentive to take good care of the home.

4. You are helping to build a better community.

Because of the rising entry price, the dream of home ownership is slipping away for many households. Research shows that the average home value is seven times that of the average annual household income, compared to only three times just two decades ago. Over 40% of first-time home buyers received down payment help from their parents

The more rental properties investors own, the more renters there are. It’s a vicious cycle where demands for rental properties drive up the property price, which forces more people to rent instead of owning. If it continues, it will only get more difficult for the first-time homebuyer to achieve home ownership.

At Lotly, we aspire to a paradigm where the concept of landlord and tenant no longer exists. Gone is the divide between landlords and renters. Here, we have folks who help others buy their dream home, and also folks who take care of that home so they can share future appreciation with the people who helped them. Both investors and homebuyers work together, and no one is left behind.

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Grace Du
Co-founder at lotly
Grace is a data scientist and an engineer, previously at Ritual & Shopify. She is the brain behind Lotly’s exclusive data analysis, and a subject matter expert on real estate market in Ontario.