Buying a rental property as an investment

How do you make your dreams come true and have more freedom? You buy them one dollar at a time. When we think about some of the wealthiest people, we see that they have often built their wealth from real estate. Real estate is one of the soundest investments that someone can make and can range in a variety of different properties. Some go into commercial real estate, which can be anything from malls, to hotels, to offices. Others go into residential real estate. When we think about necessities to carry on our day to day life, we often think about having a roof over our heads. A smart way to build wealth is by buying a rental property. With any investment you make, it’s beneficial to be well-informed before making such a large investment.

Start with what you know

When starting out as a real estate investor, it’s advantageous to buy in a neighbourhood you are familiar with. You may know that one neighbourhood is closer to or has a wider variety of amenities than another. For example, buying close to a university or school will typically mean that it is in close proximity to a grocery store and transportation. These are both basic and sought-after necessities for potential renters. Additionally, draw upon your previous life experiences when looking at neighbourhoods. If you were a university student, maybe look at buying a rental property near campus for students to rent out.  If you aren’t as familiar with the area, try scoping it out for a few weeks to get a feel of it and familiarize yourself with the neighbourhood. Go sit at a local coffee shop in the are to get a feel for the locale and if they’re the kind of people you would want to work with.

Different types of properties 

A variety of different property types offer investors benefits. Properties with 4 units or less and a minimum down payment of 20 per cent allow investors to have a residential mortgage. These include property types such as single-family, duplexes, triplexes, and quads. When home owners invest in properties with four units or more, they must have a commercial mortgage. This is more complex for investors and typically also have higher interest rates. Moreover, these allow investors to be a part of neighbourhoods and communities that have a healthy mix of renters and home owners. These properties tend to attract reliable tenants that are willing to pay higher rates. They have a great potential for growth and offer the best balance for risk versus return on a property.

Below market price

Buying below the market price is advantageous for a couple of different reasons. Buying 10-20 per cent below the market price allows you to grow your overall net worth and ensures your financial security. The 10-20 per cent gives home owners a little wiggle room for if they need to sell quickly or make a return on their investment. If they need to sell quickly, they don’t need to stress about a lower price tag having a negative impact on their return. Moreover, buying below the market price gives you an instant return on your investment! Buying in more of an “off-season”- like the fall and winter- can lead to lower listing prices on properties.

To make your dreams come true and have more financial freedom, one of the first things you should do is take ownership of the situation. Start building your wealth with sound investments like rental properties. When you’re ready to finance a rental property, talk to one of our professionals at Clinton Wilkins Mortgage Team. You can schedule a free consultation here.