Invest in real estate, Is it for you?
You own your home, some will tell you that you are already a real estate investor. However, as we mentioned in a previous column, investing in a single-family property that you live in does not make you a real estate investor in the strict sense where we normally hear it. There are two types of residential real estate investor: one who invests in an income property and one who buys to resell quickly after doing or doing some work most of the time. The famous “flip” real estate. There is also talk of speculation in the latter case. Let’s look at the qualities of each of them.
Tenants or not?
First, if you invest in a rental property, you have, by definition, tenants, who pay some if not all of your mortgage and you earn income. In this case, you will be inclined to choose according to the type of buildings and dwellings and the type of tenants who live or will live on your property. Many professionals will therefore advise you not to rely on luxury apartments because the price there, the difficulty will lie in finding tenants who will pay ruby on the nail and are there to stay, a good amount of time at least. In the case of luxury apartments, the question arises: why can someone who can afford a house or condo choose to rent an apartment for $ 1500 or more per month?
Check the tenants
This is probably temporary and you will often have to look for other tenants or live with a vacancy in the apartment a few months a year. If all things considered it is still worth it, perfect since there is a market for this type of apartment too but it is much more limited than that of “standard” housing we will say. In addition, we discussed in a previous chronicle the precautions to take before embarking on a property income. One of them is essential: check the tenants and the processes underway at the Régie du logement du Québec.
A property in good condition would be a wise choice too. Unless you do not mind receiving calls at any time to have the piping or heating repaired urgently.
Buy for better flipper
On the other hand, in the case of the flips, you will seek a property which does not pay mine but whose bobos are, after all, not very expensive. Indeed, to obtain a capital gain on your investment in this second case, we must look for the property for which, yes it will take a little time and money to revamp but we can then sell with a good profit.
What we are looking for here is an aesthetic make-over. The house does not look good but a good cleaning, painting again to the size or replace the tarp will give it a completely different look cheaply and can allow a quick resale with a good profit. Avoid, unless you are more experienced in this matter, major repairs, the roof running, the plumbing completely obsolete, fenestration or kitchen to change.
Better to plan more
Before making a purchase, calculate all actual (known) and potential expenses and add a 15 or 20% for contingencies. Does this seem important to you? Remember, this is an investment that by definition is risky. Better to plan more and if you never have to use this cushion and your profit will be more important, in all the cases of figures. If, on the other hand, it is necessary to dig into our buffer money, the calculations would lead you to a good investment anyway, even having calculated this in your total cost.