Seeking out real estate investment tips for beginners? Learn how to get started with my top five tips…
Spend a day walking around Toronto, and you’re bound to overhear at least one conversation about investing in real estate. It makes sense. When it comes to investment properties, there’s no shortage of opportunity in this city. And the benefits are impressive: from helping you build equity to generating passive income, there are many reasons to take the plunge. That said, there’s also a lot of confusion on the subject of what makes a smart investment. Where do you even start? Here’s what you need to know before you dive in.
1) Go over your financing options
It’s one of the most important real estate investment tips for beginners: know your financing options. Unless you’re planning to pay cash for your property, you’ll need to do some serious mortgage shopping. That means looking at various lenders or brokers to determine which is right for you (remember, some offer lower interest rates than others.) Before you even get to this step, it’s a good idea to know your credit scores—and the general financial shape you’re in. Having this knowledge will help move the pre-approval process along.
Don’t forget: obtaining mortgage pre-approval is crucial. Having it will help you determine which properties you can afford. It will also show sellers you’re serious when you start your hunt.
2) Develop a real estate investment strategy
It sounds obvious, which is why so many new investors overlook it. But before you even consider buying a property, make sure you have a sound real estate investment strategy in place. Are you thinking of a longer-term strategy, or something short term? Do you plan to buy and hold a property, or flip one for a profit? Would you like to go in on a joint venture?
While it may be tempting to snap up a property that has potential, it’s best to go into the process with a real estate investment plan. Depending on your situation, it may make sense to be flexible. That said, even if you consider changing your investment strategy to align with a property you find, it’s best to work out the financials as clearly as possible before making a purchase.
3) Find an agent who knows the neighbourhood—and the market
I’m a big believer in benefiting from the knowledge of experts. When it comes to investing in real estate, that often means talking to the right financial advisor. It means finding the right lender if you’re seeking financing. And it also means working with an agent who knows the market—and the neighbourhoods where you’re thinking of investing.
An experienced professional can tell you if an area is primed for future growth. They can also match potential opportunities with your investment goals. Should you consider that unassuming property in an up-and-coming neighbourhood in Toronto, or opt for a sleek downtown condo, or maybe a newer pre-construction development in the city? Your investment agent can help you decide.
4) Perform an investment property analysis
Before committing to a property, it’s important to have a clear idea of the profit you can reasonably expect to receive from it. That’s why I always advise doing an investment property analysis. The process is relatively simple, and it will help you make an informed decision before you buy. That said, you’ll need to make some educated guesses—make a spreadsheet and do some math. For example, you’ll need to have a good idea of what it will cost to maintain a property before you can find its cash flow.
At this stage, you should keep your estimates conservative in order to minimize your risk. Don’t assume that you’ll be able to charge the highest rent in the neighbourhood, even if the property you’re looking at has a ton of in-demand features and amenities.
5) Set aside enough money for unexpected costs
I’ve already mentioned the importance of budgeting conservatively. But there’s another way to reduce your risk, and that’s by factoring in unexpected costs. This is one of those real estate investment tips for beginners that’s absolutely crucial. First timers are often excited about purchasing an income property (as they should be), which makes it easy to overlook potential issues that could arise in the future. More seasoned investors know that unexpected costs—like major repairs and turnover times between tenants—are bound to arise. To avoid getting into a sticky financial situation, make sure you’re being as realistic as possible about what could happen in the future.
Looking for more real estate investment tips for beginners in 2019? I can answer all of your questions—and help you find a property that will help you meet your goals. Call or text me at 416-500-5360, or send me an email at rashid.notash@rogers.com and ask away!
