Real estate investments generate steady supplementary income, and can be a very profitable long-term investment if you’re looking to fund your retirement. The last thing you want is to sign onto a long-term investment that just doesn’t have what it takes to give you the return on investment you require. Whether you’re looking to purchase your first Toronto investment property or your tenth, there are a number of factors that you’ll need to consider before you put pen to paper and decide whether a property is going to be worth your time and money.
Age – not always just a number
When it comes to picking out the perfect investment property that meets your long-term needs, age isn’t just a number. A general rule of thumb for real estate investors is that the older a property is, the more work it’s going to be in the long run, and the more you’re going to end up spending on maintenance. The last thing you want is to pick out a seemingly perfect property, only to have it fall apart on you because it’s an older home and needs some TLC. That being said, older homes don’t always require more maintenance than newer homes. If you decide to go ahead and purchase an older home as a rental property, it’s a good idea to ask the previous owners and your realtor about how recently it’s been renovated and to what extent it’s been renovated – this is especially important for things like wiring, plumbing, and the roof.
Condition and potential workload
In addition to the age of the property, its condition is one of the most critical factors – it’ll decide how much time, money, and effort you’ll have to put into your investment. Buying a fixer-upper might seem like a good idea at first, but the amount of time and money you’ll have to put into the property to make it liveable could quickly grow out of control. A home in solid condition won’t require frequent maintenance or repairs, but a home in mediocre to bad condition can very quickly eat up the income you generate from the property. In the end, the condition of a property will determine the free time you spend maintaining it, the workload of the investment, and its potential return on investment.
Cost and return on investment
The price paid for the property will depend on how much you can afford, and how much you think you’ll be able to generate from it – it’ll also determine how much you’ll be able to charge for rent. The rent you’re able to collect from the property needs to be high enough to cover the cost of the property and the various expenses incurred, but shouldn’t be so high that you’re unable to find tenants willing to pay the price. Ideally, the amount you charge for rent should allow you to continue paying off the investment while at the same time generating a profit. This is where a company like Highgate can really help you out; as Realtors and property managers, we know what tenants are willing to pay for rent in specific Toronto neighbourhoods, and how much you should pay for a property in order for it to be a worthwhile investment.
A convenient location
Location can make or break the appeal of your rental property for many potential tenants or buyers – few people want to invest their time and money in a property that isn’t convenient for them. Look for a property located somewhere that’s considered to be desirable by your target audience – is it located near shopping centres, restaurants, public transit, and other amenities? Is the neighbourhood up-and-coming, or has it developed a bad reputation? These things are enormously important in your purchase decision. The location of your investment property will affect its resale value, price, rent payments, appreciation, and even the quality of tenants you’ll be able to attract.
Highgate Properties is well-versed in what makes a Toronto rental property worth your investment, and can manage it for you with care. Our property managers take on the day-to-day duties associated with being a landlord, allowing you to focus on the more important things in your life. For more information about the property management and realty services offered by the experienced team at Highgate Properties, contact us today.