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Investing for the Average Joe

You’ve heard it before, in Real Estate, what matters most is Location, Location, Location.  This is what many consider to be the Golden Rule of Real Estate.

This rule holds even more true when it comes to venturing into the world of purchasing real estate as an investment rather vs. a primary residence.  This may sound obvious, yet more often then not, for the Average Joe (or Jody ;) ) when beginning the process of searching for the perfect investment property, there invariably comes a time that we lose sight of this Golden Rule and how it pertains to the overall performance of our investment.  All too often we become side tracked by that cute bungalow with the renovated kitchen in the area that, okay, maybe isn’t so great, in a location that isn’t exactly ideal, but...it’s just SO cute! 

Location is the end-all be-all when it comes to Investing in Real Estate. Everything else (for the most part) can be changed, fixed, or overlooked, but a bad or poorly thought out location will kill the deal. The following is a set of criteria to include in your Investment Purchase Plan that can help you determine if you've found the ideal property and held true to the Golden Rule.

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The Transportation Situation:

Whether you are looking for a property to Flip or one to Hold and Rent, the number one investment rule to look for, in most areas, is public transportation.

If you are purchasing with the intention of renting, you'll want to ensure that your property is close enough to a major transportation route that your tenant can either walk the downtown core, or at least to a train or bus that will take them there. This can help you to attract a corporate or business tenant that is more likely to have a secure income and strong references, and can help to set your rental apart by offering them the option of saving the often exorbenant cost of renting parking downtown.  As an added bonus, proximity to transportation becomes an even more appealing feature to prospective tenants during our cold Canadian months, which can help you to secure a longer lease term once you’ve found the right person(s).

For longer term holding properties, ones that you’d like to see an eventual peak in appreciation, look for plans for future transportation, i.e., new LRT or train station, or even rerouting of a major bus route.   Buy within walking distance of those and your chances of appreciation skyrocket.

Shopping and Amenities:

If possible, follow the major chains when it comes purchasing in a newer area, such as Wal-Mart, Chapters or Starbucks (and really, who wouldn’t love to live next to their favourite Latte Localle?).  These conglomerates have their own teams of researchers looking into which areas are going to be the next “big” hits, so why not piggyback off the efforts of their well versed staff?

Generally speaking, if there are two identical homes for rent in the same area, the property that is closer to amenities such as schools, grocery stores, restaurants, coffee shops and large chain stores Wal-Mart/Superstore that will be the one that rents faster and at a higher price. Furthermore, when it comes time to sell, local amenities are often an added incentive to a prospective buyer.

Close to Home Base:

No matter what you’ve heard (or seen on HGTV),  investment real estate is not a get-rich-quick scheme.  It is a business, and as a business it will involve an investment of your time, not just your money.  You can mitigate the investment of time by keeping your ‘commute’ to your business to a minimum.

Unless you plan to employ the serivices of a Property Manager, you should expect to make unplanned and sometimes frequent visits to your property to deal with maintenance, emergencies or to show it to prospective tenants. You may even have to visit the property suddenly in the middle of the night.  

Having said that, we aren’t suggesting that you buy the house across the street from you and rent it out.  This has the potential to be an unparalleled disaster and an ongoing headache.  If you’ve ever been a landlord, or heard stories from someone who has, you already know the happy-go-lucky, love-everything-about-the-property tenants are like the lottery – your chances of winning really aren’t so hot.  With this in mind, a little more than a streets-distance between you and them will contribute to far more peaceful and strictly professional relationship with your tenants.

Make it easy on yourself. As a rule-of-thumb we suggest that your limit your search to properties that are within a half-hour drive, otherwise you’ll rue the day you ever had the hair-brained idea to become a Real Estate Investor in the first place.

Implementing this simple criteria into your Investment Purchase Plan will help to prepare a solid foundation for a more stress-free, and hopefully, more profitable transaction.  Just remember:  

Location! (Transportation)
Location! (Amenities)
Location! (Communte to Home)

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