Buying residential real estate is one of the best investments Canadians can make, says the author of a book that dispenses advice to both novice and experienced real estate investors.

"Historically over the last 25 years, real estate has gone up across the board on a national average roughly five per cent greater than the inflation rate," says Douglas Gray, author of the newly revised Making Money in Real Estate: The Canadian Guide to Investing in Residential Property. "So if you're looking at an inflation buffer, it obviously makes sense. It's an infinitely better return than any other form of investment," adds Gray, who notes that seven out of 10 millionaires in Canada made their money in real estate.

A former real estate and business lawyer who has advised clients about real estate for the past 35 years and now conducts seminars, Gray says current low mortgage interest rates and the ability to leverage the purchase of a property with a large mortgage are what make real estate the most profitable investment.

"The real return is what makes a difference, because it's not the value of your property that has gone up when you compare it to the stock market that really matters," he says. "It's how much you put into the deal."

Douglas Gray

However, real estate investing is not without its pitfalls, cautions Gray. One common pitfall is lack of self-awareness, lack of a plan and lack of a methodical step-by-step approach to follow the classic strategies and techniques, he notes.

"This is really a key part of setting the foundation of your real estate investment strategy - self-assessment, an investment plan and then working through the 10 steps from the investment plan to make sure you made the right decision for you."

Gray, who lives in Vancouver, says he has personally profited handsomely over the years by following the advice and techniques he describes in his book, one of 20 that he has written about real estate investing, small business, and estate and retirement planning.

The original edition, written 13 years ago, has recently been updated (Wiley, April 2005, $39.99) with two new chapters covering insurance aspects and financial and estate planning.

Gray also encourages investors to make extensive use of the Internet to research property and to access data, including using free online amortization tables.

"It really is designed for those who are thinking they want to diversify their portfolio and invest in real estate, and they want to know how to do it right," he adds. "It's geared to the wannabe first-time investor and those who are experienced and sophisticated investors as well."

Although Gray's book is generic in terms of its applicability across Canada, he says it provides tools to determine not only where an investor should buy but how to determine whether the property is right for them, and why.

"The best areas to buy are wherever you have a core magnet for employment purposes or where people want to buy second recreational properties," he notes.

B.C., Alberta and Ontario are extremely hot markets because of their buoyant economies, he says, with the major cities in high demand.

And even with the frenzied lineup of people queuing to purchase new condominium projects that come on the market - particularly in Vancouver and Toronto - there is still money to be made, Gray believes.

Asked what he hopes readers will get out of his latest book, Gray says, "The short answer is a turnkey framework to ensure that you make money on your real estate investment, with the least amount of risk, the least amount of stress and the optimal amount of profit return."

(Jan Mansfield can be reached at jan@businessedge.ca)