Investing in real estate can be a rewarding experience. We've all heard stories about those who bought into an area before prices skyrocketed and they made a bundle.
But, there are just as many stories about those who lost their shirts because they bought an investment property just before the market did a nose-dive. Or, those who bought a great property only to have it trashed by tenants.
There are lots of stories, some good-some bad.
If you're thinking of investing in real estate, here's a few considerations:
1) Look for the worst house in the best neighbourhood you can afford. Why? Because the higher-priced homes generally buoy up the value of the others. You'll stand a much better chance of increasing value with a few well planned improvements.
2) Before making an offer, factor in all the expenses you will incur in purchasing the property and improving it to the standards in the neighbourhood. Don't ignore the cost of borrowing, management expenses (even if you are managing it yourself) and a vacancy factor. You can't expect that you'll have a tenant every single month.
3) Make sure you understand current tenancy laws. You can be sure your tenants will be up-to-speed on their rights, make sure you are too. Don't assume all provinces have the same tenancy laws. They don't!
4) Don't expect tenants to care about your property they way you would. But, you can encourage them to take better care of it than they might otherwise. For example, offer to pay for materials if they put in the labour. If you've got tenants who can wield a paint-brush, offer to buy the paint (keep it neutral).
5) Don't assume that all tenants pay their rent before other bills! Make sure you've done a credit check and received references and make sure you actually check those references.
6) Make sure you've got the right insurance in place.
7) Look for properties in communities that are just being discovered.
8) Get as much information as possible from Experienced Real Estate Investors.
Tips on Investing in Real Estate
- December 9, 2013