Wealth Building 101

We’re coming into prime RRSP season with a lot of people looking at how much tax they’ve paid and what they’ve been able to save over the year. In other words, it is the time of year when people start looking to the future and how to secure their financial future and retirement years.

Real estate investment is becoming increasingly popular among local homeowners, and with good reason. Owning real estate is one of the best methods to grow a family’s wealth.

Purchasing an investment property can be a great way to diversify your finances and start working toward financial freedom, but getting started can be daunting. If you’ve been thinking about taking the leap and investing for the first time, here are a few of the top things to consider when starting your search.

Think like your ideal tenant.

When selecting the location and type of property to invest in, consider what your ideal tenant would be looking for in a rental. If you’d like to attract new grad professionals, consider a newer townhouse or stacked townhouse near the city core with great walkability and amenities. If you’d prefer a young family, then a more residential single-family home close to parks and great schools could be a better fit. Researching ahead of time as to what’s available on the market for rent will also show you what’s in high demand and will give you an idea on what rents can be achieved with your new rental property.

It’s not about timing the market, it’s about time in the market.

In most cases, for an income property to become truly profitable, you’ll want to hold it for the long term. In a low-risk market, you can be reasonably sure that your investment will continue to grow with time (despite market fluctuations). So, instead of focusing on the best time to buy, focus on the most time with the property and get in as soon as you are financially ready. For some of the new products available, this could mean looking for a deal that at least breaks even or has a small monthly shortfall that you can manage. This may be helpful in reducing overall income taxes (consult a professional tax advisor prior to doing anything).

Consider owner-occupied.

Choosing an owner-occupied property, such as a duplex or suited single-family home, can be a great option for a first investment. Not only do you get peace of mind being in close proximity to your tenants, but you may also qualify for a larger mortgage. A 20% down payment is required if you’re buying a rental you don’t intend to live in, but most lenders allow for 5% down if it will be owner occupied. Most lenders will also add a portion of the income from the rental portion of the property to your regular income, helping you to qualify for considerably more.

If you are thinking about starting the search for your first investment property, let’s chat. As the real estate market and the mortgage market has been evolving over the past few years, there are more and more opportunities for people to get into cash-flowing and positive rental properties. The first step, as always, is to sit down with an expert to plan out and review your goals, and organize a path to achieving them. There is no better time to start than right now!

Happy Friday,
Paul

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Detached 2 Storey
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2,850 sqft
4 Parking Spaces

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