An investment property can be a great thing; it can generate cash flow while appreciating in value. The key is to know what to look for when adding real estate to your investment portfolio.
1. Neighbourhood: The location will determine the types of tenants you attract and your vacancy rate. If you buy near a university, the chances are that students will dominate your pool of potential tenants and you may struggle to fill vacancies during the summer months.
2. Average Rents: Rental income is your bread-and-butter,so you need to know what the average rent in the area is. Make sure any property you consider will bear enough rent to cover your mortgage payment, taxes, and other expenses. Research the area well enough to gauge where it will be headed in the next several years.
3. Transit & Amenities: In large cities like Toronto, being close to public transit is a massive plus for renters. Tour the neighbourhood, check out the parks, restaurants, and all the other perks that attract renters.
4. Property Taxes: Property taxes are likely to vary widely across your target area, and you want to be aware of how much you will be paying. High property taxes are not always a bad thing in a great neighbourhood that attracts long-term tenants, but there are areas with high taxes that aren’t as attractive either.
5. Maintenance Fees: If you are buying a condo or condo townhome, you will pay monthly maintenance fees for the upkeep of the buildings, grounds, and common areas. These fees can range from a few hundred to upwards of $1,000 every month, and these fees rise annually by a percentage to each to unit holder. This will impact your profi tability and cash fl ow so be sure to investigate the condomiunium’s finances to determinethe overall financial health of the building.
6. Crime: No one wants to live next door to a hot spot for criminal activity. Check the rates for vandalism, serious and petty crimes, and note if criminal activity is on the rise or not.
7. Job Market: Locations with growing employment opportunities attract more tenants. If you see an announcement about a major company moving to the area, you can be sure that workers will be in search of a place to live there.
8. Schools: Although you will be mostly concerned about the monthly cash fl ow, the overall value of your rental property comes into play when you eventually sell it. If there are no good schools nearby, it can affect the value of your investment.
9. Future Development: The municipal planning department will have information on new development that has been zoned into the area. Watch out for new developments that could hurt the price of surrounding properties. Additional new housing could also compete with your property.
10. Listings and Vacancies: High vacancy rates force landlords to lower rents to attract tenants. If a neighbourhood has an unusually high number of listings, it could signal an area in decline.
Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid in full, and managed with reasonable care, it is about the safest investment in the world. - Franklin D. Rosevelt
Thanks for taking the time to read The Home Blog.
If you have any questions about investment properties, please contact me.
If you wish to receive my monthly newsletter "AROUND THE HOUSE " - which delivers targeted insight to trends in the marketplace, please drop me a line at info@adrianoaldini.com.
Post a comment