Owning real estate can be a viable way for you to grow your nest egg, save for retirement, and have peace of mind knowing you're financially secure. If you're thinking of buying an investment property, there are many options to consider and decisions to be made before making a purchase. Consider your options carefully before jumping into the world of real estate. Here are just a few factors for you to be aware of:
Buy-and-hold vs. Flipping a property
Do you want to buy a home and rent it out? Are you ready to become a landlord? Everyone has heard at least one 'nightmare' story about the tenants who don't pay rent, or trash the place. It doesn't mean it would happen to you, but you're going to have to do your part to make sure you rent to honest, reliable people. Also, are you going to take on all of the repair calls yourself (and be called when the furnace breaks down at 2 in the morning), or are you going to hire a property manager? We have partnered with Jackson Property Management and can get you connected!
Flipping a property means you can make a profit fairly quickly. Buy a home that needs some work, fix up the place and then sell for a profit. This is best suited for you if you consider yourself a handyman (or handywoman) and don't have to hire a contractor for the bulk of the work.
Both options can give you a nice income; one is a long-term strategy, while the other is short-term (usually less than one year).
When you're buying a home for yourself, banks often allow for a 10% down payment towards the purchase. In some cases, it can be 5%. When you're buying an investment property, expect to put down much more than that. It can be as much as 30% depending on the lender. That's a big chunk of cash for most people, so do your homework when deciding on whether a property is worth buying or not.Don't forget to include other expenses in your calculations like closing costs.
This is extremely important when buying an investment property. In fact, location is everything! Whether you're going to be renting the property or flipping it, you want to buy something in a popular neighbourhood, with low crime rates and a pleasant overall atmosphere. This will make it much easier to sell or attract renters.
Also consider whether you're going to be managing the property yourself or hire a manager. If you're going to be doing it yourself, you'll likely want something fairly close to where you live.
If you're looking to invest in another country entirely, be aware that there may be different mortgage, tax and capital gains rules than if you buy in Ontario.
Buying an investment property can be incredibly rewarding but it is not for the faint of heart. Do your homework before you make any concrete decisions. We are here to help! Give us a call today!