5 Things to Consider before Buying Real Estate for Investment in Ontario Canada
Thursday Feb 01st, 2018
Real Estate as Investment is only type of asset you can purchase which can appreciate as well as generate income at the same time. GTA real estate investments has proven again and again that it is very stable, giving exceptional appreciation year after year so can be considered one of the best types of investments in Greater Toronto Area. Overall far more safe and rewarding then volatile stocks or GICs reaping hardly any reasonable interest rates even to keep up with inflation.
Most of the Investors prefer simple investments like a rental single family properties like condos, townhouses or semi detached. After gaining some experience, few also consider commercial and multi family units. Everyone has different goals when they buy investment real estate like generating extra monthly income, park their savings in a safe investment and beat the inflation, financial planning for retirement etc. No matter what ever is your financial goals, there are a few things that the prospective landlord will have to be aware of in order to get the most out of their investment and also make sure that they get a return on their investment without much difficulty. Some of these things to consider are here below:
1. Your Income shall be sufficient: Getting into investment real estate is not for everyone. You shall be financially stable to look into this as it is not a liquid asset, which you can sell the movement you are tight on cash. Even though 75% to 80% can be funded with a mortgage, balance 25%-20% of down payment should be from your own savings. Consult your real estate agent and your mortgage broker before you jump in this pool.
2. Mortgage requirements for Investment property: Different Lenders have different mortgage requirements when it comes to investment property. Even with touch mortgage rules as in currenet market, there are still lenders available who are willing to fund you with rental property mortgage and willing to consider 100% of rental income. Any experienced Realtor can guide you on this.
3. Extra Expenses to consider for real estate investment: Property taxes & any applicable condo fees can significantly add to your carrying cost per month and will therefore be a determining factor in the rent amount that you will need to cover you for all your expenses. You shall ask your real estate agent to give you comparative analysis for expected rental in that specific neighbourhood. Also call your Insurance company to check on cost of fire insurance, if you are considering buying a freehold home as a rental investment vs a condo, which has that insurance covered in your condo fees most of the time. That will help you take more informed decision.
4. Other Misclaenous Expenses to consider: You shall factor in some costs for regular property maintenance, which will vary depending or your property age and type. You shall also consider vacancy period in a rental real estate. Most of the time 30 days vacancy period is the right factor to consider between the switch of tenants but you shall take input from your real estate agent on this. Also you shall consider adding real estate fees into your annual rental cost.
5. Finding the right tenants: it may seem unimportant but finding the right tenant is one of the most important factor. I have seen some landlords hasting to get their property rented through free classified websites. Most don’t realize that one wrong tenant can change your belief in investment property all together. Checking them under microscope is of extreme importance. Don’t just rely on one credit score or job letter, as there is lot beyond that to check too. You are far better off keeping your rental condo or rental house vacant for few extra weeks rather then getting a non qualified tenant. Hiring a qualified and experienced real estate agent can save you from getting prey to a wrong tenant.
Whether you are experienced real estate investor or first time home buyer, mistake can be done without professional guidance. Hire a qualified Real Estate Agent to guide you through your options before you get started on considering buying a investment real estate. Being a Investor myself in multiple rental properties, I will be happy to be of any service. Please don't hesitate to contact me if you've any questions. I am always just a phone call away!