Buying an investment property is an important decision and should be thought out and planned carefully. There are many factors to consider when purchasing an investment property, but with research and careful planning you can become a savvy real estate investor!
- Work on the Cash Flow: You must carefully plan out your after-tax cash flow to maintain your mortgage obligations as well as the taxes, repairs and upkeep that your investment property will require. Find the right mortgage for your situation. Most non-owner occupied properties will require a 25% down payment.
- Find the Right Property: It’s all about location and price. Invest in the best location possible. A property in a desirable neighbourhood will appreciate more and attract better tenants. You also want to the best rental income possible. Your REALTOR® will provide you invaluable advice to find the best property for the best price.
- Think Long Term: The market will inevitably swing in different directions, but if you have invested for the long term, you can ride the swings out and your rental income will remain stable. In today’s market, investing for the short-term (i.e. flipping houses) hasn’t be as lucrative as before.
- Find the Right Property Manager: A property manager is a important ingredient in investing in real estate. The property manager will screen potential tenants, monitor your investment property and deal with any unfortunate situations that arise (such as evictions).
- Going it Alone: If you do not plan to use a Property Manager, you need to plan how you will advertise your property, screen tenants, write lease agreements etc. Have a plan before you start.
- Renovate Appropriately: If you plan to renovate your investment property, make sure you renovate to the appropriate standards of the neighbourhood. If your property is located in a less desirable neighbourhood, do not add expense finishes such as granite countertops. You will not get your return on investment.