Investing for the first time is exciting and nerve-wracking. This is probably the biggest purchase you’ve ever made and the decisions must be considered very carefully.
At Regalway Homes, we’ve been helping people invest in real estate for years, both as individuals and as part of a group investment. Here are five of the most important things to consider before you jump in.
Is this the right time?
There is no way to know with absolute certainty how the market will hold up, but there are certain times that are better than others to jump into the real estate market. In the wake of the first coronavirus outbreak, fixed and variable mortgage rates in Canada were at a historic low, making it a great time to buy.
Inventory was also low, presumably as people were hesitant to move during the pandemic, and we saw an increase in people moving to homes with more space. As a buyer looking for an investment, without the benefit of time on your side, this is a great market for an investment buyer.
To determine the best time, look first at mortgage rates and then at inventory. If you need help keeping your fingers on the pulse of the real estate market, look to a partner like Regalway Homes.
How long will I keep this property?
As you move through the purchase of a new property, you’ll realize that time is a winning factor when it comes to investment.
“There is no guarantee that your property will appreciate, but presuming you did your research and the property is in a desirable location, you can reasonably assume the value will hold, if not increase, by at least 1% per year. Economists suggest 3% to 5% is reasonable to expect, but conservative forecasting approaches are better to avert financial concerns down the road.” (nolo.com)
If your intent is to flip the property, then you should be expecting to invest a large sum in order to upgrade the property quickly before selling again. If your intent is to sit on the property, you will need to make smaller investments over the course of approximately 5 years to earn a good return on investment.
Taking the time frame into consideration, you can better forecast how the return on your investment will be used (retirement or college costs for example)
How versatile is the property?
When considering your timeframe, you can’t forecast the financial situation at the time you expect to sell.
In order to get the most bang for your buck, you will want to invest in a property that can be used in more than one way. Is it possible to rent the property long-term, or short-term? Are there restrictions against vacation rentals in the area? Is it possible for this property to function as your primary residence? Could it be subdivided in order to become more than one property? With the answers to these questions in your pocket, you will have a stronger investment portfolio that can serve you well, no matter what the market.
What are the comps like?
Real estate agents will pull comps (comparative properties) in the area to be sure that your property is priced correctly, but when you invest in a property, you also have to look at it with a visitor’s eye.
As you drive up to the property, what feelings do you get from the surrounding properties? Is this home the best on the street? That’s not where you want to be, just as you don’t want to be the very worst on the street unless you intend to make some serious upgrades.
An investment property has to appeal to more than just yourself. Whether you’ll be looking for tenants or future buyers, it has to be a practical investment. Look at the local schools’ ratings, consider the distance to the nearest hub (what would the commute be like?), do the research to find out if the neighborhood is family-friendly
The type of research needed is time-consuming, but we can help. By partnering with Regalway Homes, you can be sure that your investment is a sound decision.
Are there other people involved?
Speaking of partners, there are many ways to invest at different levels, including silent partnerships or going solo. There are definite benefits to either one, but starting your investment journey as a silent partner relieves much of the risk and allows first-time investors to learn so much before going solo. Read more about those benefits here: The Benefits Of Being A Silent Partner
When you are considering an investment, one of the first things you should check is any bylaws written by an HOA, a condo association, or even your local government. An HOA can help keep a property well maintained, but will also limit your versatilities. It’s not the norm for an HOA to allow vacation rentals, or multiple vehicles on the property if you decide to sublet a room or divide the property.
In the wake of COVID-19’s first wave, the Ontario government started to lay down restrictions on vacation rentals. This is an unusual circumstance, but going forth, the ability has been created for such restrictions and you’ll need to know how your local government might react to future events.
Real estate investing has been a lucrative business for Regalway Homes and we are always looking for new investment partners to enjoy such good returns on investment. We are experienced and knowledgeable and can make first-time investing easy on you. Get in touch now to learn more.
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