London Ontario Real Estate Investment Types
The fastest growing commodity in Canada is real estate. In Recent years real estate has increased in value by 10% compared to other goods and services that increased by only 4.5%. With such a high return on their investment, many people are purchasing real estate instead of stocks and bonds.
A popular investment in London Ontario is to invest in run down properties. Better known as a Fixer Upper. Here the investors buy for a low price and hope to sell for a higher price once the necessary improvements to the house and yard are made.
it is common for London Ontario investors choose to do the repairs themselves, saving on labour costs. Others hire contractors to do the work. Either way, it is expected that the cost of repairing the home will increase its value. The new value is anticipated to exceed the original cost plus the cost of repairs. If the owner can rapidly sell the property, he/she can recoup their investment, make a profit and move on to another real estate purchase. When debating on a Fixer Upper, the investor must realize that most of the profit is made by a smart purchase with a large upside.
Many London Ontario Real Estate investors invest in Student rentals. London's University of Western Ontario is one of the Largest Universities in Canada, and London also houses Fanshawe college. With so many students needing accommodations, it is not surprising so many London Ontario Real Estate Investors turn to Student Rentals.
The most common London Ontario Real Estate investment is the Buy and Hold Strategy. Investors purchase properties that can be easily rented out with very little repair to make them marketable. Here the owner has made the decision that the investment will be reimbursed over time, better known as Buy and Hold stategy. The monthly rent on the property must exceed the owner’s monthly payment on the loan. In the case of property rentals, the owner assumes responsibility for maintaining the property. He/she will act as the landlord, collect the monthly rent, make any necessary repairs, and handle the paperwork for obtaining tenants. If the owner does not have the time to invest in being the landlord, he/she can pay another person or real estate agency to act on his/her behalf. This saves the owner time and aggravation but it costs money to pay the substitute landlord a salary. This has to be figured into the rental price. When using this Stategy it is important to make sure your property has a positive Cash Flow each month. Common types of homes for this investment are: single family homes, condominiums, Duplex, Triplex, and Fourplex.
Multi Family Properties are investments where an Iinvestor may choose to buy an apartment building or condominium complex and rent the individual units out. Many of these properties find Their value with what is referred to as a Cap Rate. The Cap Rate is calculated by dividing the net yearly income by the Purchase price. A common Cap Rate in London Ontario at this time is between 5 - 8%. The large Multi Family strategy should be left to the experienced investor who has had many years dealing with smaller units
If you decide to invest in London Ontario Real Estate, please remember Cash Flow is King. You must ensure that your income is higher than your expenses. Many new investors forget to account for Vacancy, repairs and management.
Real Estate has three forms of income: 1) Cash flow 2) Appreciation and 3) Mortgage pay down. Most people think of appreciation as the big indicator of profit, but if your property has good cash flow, then the tenants will pay down your mortgage, making your investment a success even without Appreciation, Property appreciation can be a nice Bonus.