Congratulations on making the decision to take control of your finances, stepping firmly onto the path of larger returns and less risk. Yes, real estate investing done right is far less risky an option than sitting with RRSP’s earning 3% or less with the big banks. When done correctly, real estate investments can make the difference between a merely comfortable retirement and a truly amazing one; you can see annual returns of 25% and up. It’s not as scary as you think, and coincidentally, you are living in one of the top places to invest in Canada- right here in Guelph, and by proximal association Elora and Fergus too.
The local vacancy rate is virtually non-existent, even with all the building taking place in the South and the East ends of the city, and throughout most of Fergus and Elora. The new mortgage qualifying rules set to be enacted in January will make it even harder for first time home buyers to jump into home-ownership and will prolong their rental status. Providing beautiful, safe and well-managed places to live has never been more necessary and being a landlord can be a wonderful way to give back while also growing your personal wealth. Now that’s a win-win!
If it’s such a great idea, why isn’t everyone doing it you ask? Well, not everyone wants to be a landlord, not everyone can qualify for additional mortgages and not everyone has the patience to look after more than one property. Completely understandable, however, there are creative ways to overcome just about every objection you can imagine. Hiring a property manager can turn your investment into a completely passive exercise, you simply get to sit back and watch your equity appreciate while taking cheques to the bank every month.
You’ve read all the books, attended the seminars, crunched the numbers, pondered and convinced yourself that you’ll purchase an income property next year, or the year after. Or maybe you wish you’d done it 10 years ago when homes were far less expensive. Let me tell you that time in the market is more important than timing the market; there will never be a perfect moment to buy. If you wait for the stars to align, the opportunities will pass you by and you’ll be left standing on the platform as the train rushes by to income property nirvana… ok maybe I overdid it there, but you get the gist.
A key place to start your journey is to gather a team of professionals; people you trust who have your vested interest first and foremost, and who can provide impartial advice. You’ll be needing a top mortgage expert, a Realtor®, an accountant, a real estate lawyer, a property manager, a contractor and a respectful relationship with your local LCBO. Ask your investor friends for referrals; people love to share and often your team will grow by osmosis after you connect with one or two professionals.
The speed of acting upon a great investment property is crucial to your portfolio; you’re not the only investor considering a hot lead and most likely any offer will need to be competitive. Making sure that you are pre-approved by your mortgage lender will give you a solid idea of your purchase price snack bracket. Stay within your limits and work through the numbers- an investment is no longer an investment if you pay too much or if it sits empty for months because it’s miles from the bus route and unappealing to your target market. You may lose several bidding wars or you may win the first property that you see. Make sure that the numbers speak and you will always be confident in your moves. Buying an income property is all about the numbers, don’t make the mistake of letting emotion cloud your judgment.
Perhaps the only properties that you can afford are in a sad state of disrepair and need some rehabbing? Despair not, you’ve watched the shows on TV (addictive much?) and so you’ll recognize that this is an amazing way to give a house some love and force its value northwards, leaving something better than when you found it (a truly karmic mindset). Many lenders will gladly advance the funds for renovations and roll this into the mortgage once everything is completed. Choose to work with people who have experience and who can present ideas for a layout beyond what currently exists. There is a huge value factor associated with legal accessory apartments which can easily add 90% to your rental income by working smart and complying with both City and Ontario Building Codes. This translates into larger gains, higher monthly cash flow, amazing ROI’s and will appeal to a larger demographic when the time comes for you to sell.
There are so many ways to win in real estate and there is definitely no time like the present to either get started or to add to your existing portfolio. Investing takes care and diligence, and perhaps a few sleepless nights- yet the rewards can be vast. Work with your Realtor® to discuss hot areas for rentals, become an expert, research local infrastructure spending, listen to the advice, trust your gut and make a move; you’ll be glad you did.