Investing in real estate is one of the smartest ways to build ongoing wealth. Even if you don’t live in the property yourself, you can rent it out to generate a passive income. However, it takes significant savings to be able to afford a home. Home buying expenses don’t end there. There are ongoing maintenance costs to look into, renovations in the long run and extra expenditure to pay off the mortgage when there are long gaps between tenants. Here are a few useful tips to invest in real estate without stress.
The first thing you need is to take stock of your finances. Make a note of all the expenses real estate investment will involve. This way you will be prepared to budget your finances. Consider the down payment, utilities, maintenance costs and taxes. Property taxes differ from city to city. Make sure you are aware of the taxes in yours. Even if you are planning to rent, surplus money needs to be set aside for repairs and mortgage in the event of gaps between tenants. Pay off any debts and improve your credit score to qualify for better loans. A large down payment helps you bring down your monthly mortgage payments and insurance.
Before you invest, make sure you know the neighbourhood and geography of the area well. Is it prone to floods? Is construction planned in the coming months? Is there a mall, supermarket or convenience store in the neighbourhood? How good is the school in the vicinity? Is the area safe? Considering comparables helps weigh the pros and cons so there are no surprises or inconveniences later. It also helps you pay the right amount for the property. You don’t want to overpay or settle for an unsafe neighbourhood simply because it is cheaper. The value of your home will go down, then if you plan to resell later.
You may not get every single thing you want in the very first property. Be prepared to compromise. List your priorities to help you focus. Location is always the most important consideration. A good location will always make things convenient, cost-effective and enjoyable, as well as give you good returns when you plan to sell or rent. Would you rather pay more for a smaller home minutes away from your work or a larger suburban home that’s farther away? A small first home helps you pay off your mortgage faster. Starting small also helps you get familiar with the business of real estate investment. Once you treat it like a business, you will
learn to develop solid actionable plans with the intent of raking in bigger returns when property value appreciates.
Real estate investing works best if you prepare for it with a proper business plan. Never settle for the first property that tugs your heart. There is more to it. Plan it well with a clear mind and good understanding. It is important to have milestones to make your investment work best for you, and generate profits in the long run. The simplest way to gain a good understanding of real estate trends, plan your budget, mortgage, learn about your neighbourhood or identify your priorities and learn about ROI is by consulting a friendly, informative real estate professional.
Norm Merz is a Sales Representative with Canada’s #1 brokerage ReMax.
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