Real Estate as Investment is the only type of asset you can purchase which can appreciate as well as generate income at the same time. GTA real estate investments have 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 the Greater Toronto Area. Overall far more safe and rewarding than volatile stocks or GICs reaping hardly any reasonable interest rates even to keep up with inflation.
Most of Investors prefer simple investments like 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, parking their savings in a safe investment and beating inflation, financial planning for retirement, etc. No matter whatever is your financial goals, there are a few things that the prospective landlord will have to be aware of 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, and you can sell the movement if you are tight on cash. Even though 75% to 80% can be funded with a mortgage, the balance 20%-25% of the down payment should be from your savings. Consult your real estate agent and your mortgage broker before you jump into this pool. Don't just walk in your bank branch to qualify yourself as each lender doesn't qualify the same way for rental properties. So their feedback may discourage you
2. Mortgage requirements for Investment property: Different Lenders have different mortgage requirements when it comes to investment property. Even with tough mortgage rules as in the current market, there are still lenders available who are willing to fund you with a rental property mortgage and willing to consider 100% of rental income or willing to consider funding multiple rental properties to the same person. An 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 for all your expenses. You shall ask your real estate agent to give you a comparative analysis for expected rental in that specific neighborhood. Also call your Insurance company to check on the 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 make more informed decisions.
4. Other Miscellaneous Expenses to consider: You shall factor in some costs for regular property maintenance, which will vary depending on your property age and type. You shall also consider the 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 to your annual rental cost.
5. Finding the right tenants: it may seem unimportant but finding the right tenant is one of the most important factors. 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 altogether. Checking them carefully is of extreme importance. Don’t just rely on one credit score or job letter, as there is a lot beyond that to check too. You are far better off keeping your rental condo or rental house vacant for a few extra weeks rather than getting a nonqualified tenant. Hiring a qualified and experienced real estate broker can save you from getting prey to the wrong tenant.
Whether you are an experienced real estate investor or a first-time home buyer, mistakes can be made without professional guidance. Hire a qualified Real Estate Broker 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!
