INVESTMENT REAL ESTATE FAQs
- What is a ‘good investment’
A good investment in real estate is one that aligns with your financial goals, has high liquidity, low risk, and consistently gives you high returns. What one individual considers a good investment might be a bad investment to another. As such, by adhering to the above evaluation method, you are strategically positioning yourself to withstand higher inflation rates and a reduction in rents should they occur.
- How much do I need to begin investing in real estate?
The amount of money you need to begin investing in real estate highly depends on the kind of investment you want to make. Generally, most banks are willing to place a down payment of approximately 20% – 30%. However, you can take a mortgage and pay the down payment out-of-pocket.Other options that will help you secure a property include seller financing, real estate partnerships, and trading houses.
Sometimes, properties that make great investments require more finances. If you go for it without the financial muscle to see through your payments, you might lose the house. As such, the importance of finding the right property that suits your financial situation cannot be over-emphasized; something REP Calgary Homes is more than willing to help you with.
- Is Calgary a good market to invest in real estate?
Calgary is an excellent market to invest in. It is particularly a hot-zone for real-estate investment with most of the houses listed selling in less than three months. Being the 4th largest city in Canada, it has broad renter demographics, which increases the demand for your investment property. Also, the increase in the city’s population and the number of rental properties remaining stable has mirrored rent growth.
Besides, Alberta is a free market with no rent controls, allowing rents to rise with demand.
- How do I choose what type of investment property to purchase?
Defining your investment goals is the first step to choosing the right investment property to purchase. Single-family homes, multi-unit properties, and condominiums are some of the investment properties to choose from. The right type of property for you depends on your financial capabilities in terms of what you are willing to invest in initially and the upgrades you are looking to do on the property.
For instance, if you work full-time and are interested in an investment property, we may suggest going for condominiums.
Why, you may ask.
Condominiums are low maintenance as compared to, let’s say, single-family houses. You are only responsible for the interior maintenance and the leasing of the property as the relevant associations are responsible for exterior maintenance such as mowing the lawns and landscaping.
- Are there other advantages to owning a condominium property as an investment property?
With the array of condominiums in the Calvary real estate market, you have the luxury of picking one that appeals to you. Whether you are looking for one in a prime location, one with special amenities, or are more interested in the property’s architecture and design, you will find one that suits your preferences in no time.
Additionally, you are venturing intoa market that has more liquidity than apartment buildings. Many tenants prefer condos as they can enjoy amenities such as swimming pools and gymnasiums. This puts you at a competitive advantage as you are more likely to sell it faster than if you owned other investment properties.
- What is a good time horizon for holding investment property?
To see a return on investment, it is advisable to hold your investment property for not less than 5 years. For people targeting capital growth, treat the property as a long-term investment.
Time is an important element in the real estate market.It is not uncommon for real estate investors to live through periods of low or negative market growth. The unfortunate thing about selling before 5 years is the property might not have ample time to achieve strong growth. The longer you hold the investment property, the more time it has to appreciate. Rents increase over the years, which translate to increased revenues.
- What are the biggest risks of owning investment real estate?
One of the biggest risks of owning investment real estate is its unpredictability. Assuming that the real estate market is always on an upward trend is a common misconception with many. As much as investment properties increase in value over time, they may undergo depreciation due to inflation, among other things. However, by researching and monitoring the market, you minimize such risks.
Selling the property over a short period is another risk to consider when venturing into the property investment market. Properties take at least 5 years to increase in value and factoring in lawyer and real estate fees, you may not break-even if you are forced to sell the property before it has gained equity.
Additionally, high vacancy rates are a major cause of concern. Your property should be occupied for the better part of the year to gain revenues. As such, it is of the utmost importance to choose properties in good locations and those that are appealing to renters. They should also be well-maintained and have a contemporary look.
- How do I avoid the risk of having problem tenants?
Problem tenants are a thorn to investment property owners. To avoid the risk of problem tenants, you need to conduct an adequate background check on your tenant. Have a well-written tenancy agreement and application form, where they are required to input their employment details and proof of their income. To be thorough, make sure you ask for references from previous landlords.
Also, only rent out your property to someone who can pay the tenancy deposit and at least one month’s rent upfront. Never let tenants who cannot provide the money near your property. The money serves as a protection scheme in case the tenant cannot pay their rent or damages your property.
These are good management tactics, which make these renters someone else’s problem.
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