Real Estate investment is alive and well in the Greater Toronto/Greater Hamilton & Golden Horseshoe areas. From small condo apartments, commercial condos, freestanding commercial buildings, single family residences or multi-family residences, there are many rental property options available – limited only by the size of your budget.
Buying a Rental Property is a serious decision, one that requires careful research. A good piece of real estate is like a blue chip stock - while it typically won’t make you rich overnight, it will probably increase in value over the long run and help you build wealth.
There are many benefits of investing in real estate:
- Probably the biggest benefit is that the returns on real estate investment are twofold providing both capital appreciation and rental income.
- Leverage is another benefit of investing in real estate. When you buy an investment property you can put as little as 25% down and borrow the remainder as a mortgage.
- You can deduct expenses from the rental income you receive including mortgage interest, property taxes, insurance, utility costs, maintenance and property management fees. If you have multiple investment properties you can lump your income and expenses together so that expense from one can offset income from another.
- Another benefit of investing in real estate is the potential of “sweat equity”. If you are handy and industrious, you can work on your property to improve it, adding to its value and your wealth.
Investing in real estate is not without challenges. If it was easy, everyone would do it!
- A real estate investor has to be prepared to deal with tenants on a daily basis. Most tenants are good people but as a landlord you have to know your rights and obligations when dealing with tenants.
- Maintenance issues occur on a constant basis and as a landlord you have to deal with them yourself of pay someone else to. Paying for every little repair can reduce your income very quickly so it is best if you can do some of the repairs and maintenance yourself.
- Finding and keeping good tenants is imperative to real estate investors. Doing the work up front can help save you time and money over the long term. Landlords should have a rigorous screening process to ensure you get the best tenants possible for your rental property.
When you decide to take the plunge into real estate investment it helps to have a professional helping you along the way to educate you and to help you avoid typical pitfalls of real estate investment.
- Don’t be tempted to over-stretch yourself financially. Determine whether you are looking to work your investment quickly and turn it into a capital gain or whether you’re interested in realizing a regular income from the rental of a property for the long term. Your investment approach should guide your buying decisions.
- Determine a geographic location to invest in based on the type of property you want to buy and the desirability and future potential of the area.
- Ignore national statistics, and focus on the numbers and trends that directly affect the local market.
- Start small. For a first-time residential investor, try a townhouse. These are not only affordable, but there's always a good demand for them as townhomes appeal to a broad range of tenants.
- Investigate specific rental rules and legislation in the area. Municipalities typically have bylaws around rental properties. Read and become familiar with tenancy laws (the Residential Tenancies Act in Ontario). Know your rights and your obligations as a landlord.
If you are considering investing in real estate for the first time or if you are a seasoned investor thinking of buying or selling – give us a call. I bought my first investment property in 1989 and we have been helping real estate investors buy, sell & lease for almost 15 years. We have a passion for real estate investment and would be more than happy to share our knowledge and experience with you.