Thinking about buying an investment property in Toronto? You’re not alone. For years, savvy investors have been buying, renting, flipping and selling real estate in Toronto. Historically Canadians have always leaned toward real estate as a key investment and according to a recent study by TD Bank, several professional investors also consider their home as an investment. Not only is investing in real estate is an excellent way to build a nest egg, it also offers the security of a hard asset that you are in control of. Whether you’re a seasoned investor or a millennial interested in buying your first rental property, there are a few key things that you should consider before taking that big step.
1. Set realistic goals and stick to them
Begin by writing down a simple plan that will remind you of your goals for property investment. Are you buying this property as a long-term investment to secure your family’s future and your own retirement? Maybe you’re interested in renovating a dated property to eventually sell. No matter what your goal is, make sure that you’re certain of your intentions and that it will help put money in your pocket after all expenses are paid.
2. Do your research
A common mistake first-time investors make is purchasing a property without conducting the necessary research. There is a wealth of information that can be found online, however, a consultation with an experienced agent who can share his/her own experiences can help you weigh the pros and the cons of purchasing, and come to the right decision.
3. Borrow responsibly
Educate yourself on financing. Taking out a second mortgage isn’t as easy as your first, and when buying additional property, a minimum down payment of 20 per cent is required. Talk to your broker or bank to determine how much you can realistically borrow. It’s good to be optimistic about your property’s income generating potential, however, when it comes to borrowing, biting off more than you can chew can add unnecessary stress and strain.
4. Home Inspection
Be sure to have the property inspected by licensed home inspector. This is especially important if you’re buying an older property. For advice on repairs or renovations, hire a contractor who you can trust—if you know of a friend or colleague whose home had recently undergone impressive renovations, ask to be referred to their contractor. You want to get the most out of your investment and by simply updating an older property, you not only raise its market value, you can increase your rental prices, thereby generating more income.
5. Hire an experienced and reputable Property Manager
Property managers can help you find suitable tenants. They can perform screening and background checks, as well as deal with any ongoing maintenance, repairs, or complaints. Property managers can offer useful advice in regard to pricing and marketing your property to maximize its appeal.
6. Stay Organized
Keep all of the property-related income and expense records organized and separate from your personal finances. When it comes time to file a tax return at the end of the year, you won’t have the stress of having to track down those reports amidst other piles of paper.
7. Location, location, location
You want to purchase a property in an area that is close to amenities, has a high Walk Score and is easily accessible by major highways, public transportation or both. Be sure to research other rental properties in that neighbourhood—property investing is a business and you should be aware of your competition. If the location is saturated with rental properties, particularly vacant ones, you should look elsewhere.
Trust your instinct. Don’t be afraid to walk away if the property doesn’t feel right or work for you, no matter how much time you may have invested in the process. The perfect opportunity will come your way–remember, when one door closes, another one always opens.