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Are Canadians Moving to Secondary Cities? Should Toronto be worried?

Are Canadians Moving to Secondary Cities? Should Toronto be worried?

 

There’s a reason why people move to cities. Cities provide job prospects, wage gains, and innovation. More than 80% of Canadians live in cities. And more than one-third live in the Toronto, Montreal, and Vancouver census metropolitan areas. Covid has accelerated the trend of people moving out of cities. Is it here to stay?

Secondary Cities, Pre-Pandemic

Even before the pandemic, urbanites were slowly gravitating away from city hubs. Millennials were getting priced out of traditional powerhouse markets like Toronto, so they looked to more affordable options.

They were looking at places like Hamilton and Niagara. Both cities are commutable to Toronto’s downtown core, making them an attractive option for Torontonians.

Hamilton experienced almost a 9% year over year price increase in a one-bedroom apartment in July 2019 whereas Niagara experienced a 15% year over year increase in residential home sales activity in October 2019.

While there was growth in Hamilton and Niagara before covid, will the pandemic accelerate this trend?

aerial view of Ottawa

Smaller cities and the pandemic

According to a survey conducted by Leger on behalf of RE/MAX Canada in 2020, 32% of Canadians no longer want to live in large urban centres. With remote work becoming the norm, millennials are beginning to prioritize space over the city lifestyle. And young professionals are heading back to the suburbs with mom and dad, where they can save money. This departure of both young and experienced professionals is reflected in listing viewership and rental prices.

There was a 9.5% decrease in the average rental price for a one-bedroom apartment in Toronto from August 2019 to August 2020. Other large cities have seen similar declines, with the only exception being Montreal. This is because the city is having an influx of new condo listings in their prime downtown location and fewer listings in less expensive neighbourhoods.

While Toronto saw a decrease in rental prices, where does this leave places like Hamilton and Niagara?

In Hamilton, rents have increased by 19.5% from August 2019 to August 2020 and all condo sales (one, two, and three-bedroom) increased by 10% from September 2019 to September 2020.

The Niagara region saw one-bedroom rental rates increase by 14% from June 2019 to June 2020 and house sales increase by 38% from July 2019 to July 2020.

Year over year change in rental price for one-bedroom apartments (Aug 2019-Aug 2020)
Average One-BedRoom Apartment Rental Price in Canadian Cities Year-Over-Year (2019-2020)*
*data obtained from rentals.ca August 2020 National Rental Report

 

Should Toronto be worried?

While Hamilton and Niagara have a bright future ahead of them, is there going to be a decline in Toronto? We believe the answer is “No”.

During the 2008 housing crash, it took three months for Toronto to reverse from a decline in housing prices. At the beginning of 2009, the market saw a high volume of sales. Over time, the market did correct itself. Similar to the 2008 crash, we believe the market will eventually correct itself from the covid decline.

In fact, people are still moving to Toronto. Thanks to the lure of potentially high wages for highly skilled workers, recent post-secondary graduates see the city as a great place to move to.

For every millennial who leaves Toronto, the city gains seven new residents. Not only are educated millennials making the move, but Toronto is also Canada’s immigration hub. In 2019, the city welcomed more than 100,000 immigrants – making it the Canadian city that welcomed the most immigrants. While the pandemic recently slowed the influx of immigrants, Toronto is still expected to see growth in immigration post-pandemic. Sure, it may seem like Toronto is losing appeal to long-term residents, but recent grads and immigrants will keep the city alive and well.

The Bottom Line

How will Toronto grow alongside secondary cities? Only time will tell. But for those folks who can think long-term and look beyond fear, there will be buying opportunities, both in major centres and secondary cities.

That’s why BuyProperly chose to invest in Hamilton. They recently acquired a newly renovated detached home in Hamilton for below asking. If you’d like to invest in Hamilton for as little as $2,500, learn how on their website.

in Editorial Posted by wpengine

Millennials struggle to achieve their real estate dreams using traditional investments

Millennials struggle to achieve their real estate dreams using traditional investments

A KPMG poll shows soaring house prices and rising personal debt are making it nearly impossible for Canadian millennials — even those with high-paying jobs — to afford a home.

Statistics released by the Canadian Real Estate Association show national home sales set another all-time record in February 2021.

Owning a house has always been a major life milestone, or it used to be until millennials stopped chasing it. Often judged for living in their parent’s basement way past their welcome, millennials have had to delay investment in real estate. In many ways, the traditional model of real estate investment is working against them.

Rising Costs, Student Debt and Complicated Process

Home prices continue to rise, and so does the average age of millennials staying at their parents’ home. In today’s market, young first-time homebuyers juggle student debt, rising home prices, and stringent mortgage requirements.

The most educated generation ever is finding that paying down their student debt is delaying their ability to save up for a down payment on a home. With rising prices, the down payment required keeps increasing.

While real estate is arguably the best source of passive income, small investors cannot enter the market because they don’t qualify for loans, don’t have stable jobs to make regular mortgage payments, or can’t arrange for the down payment.

The complicated path to real estate investing is a barrier for millennials, who seek hassle-free and transparent processes. However, platforms like BuyProperly have created a solution that eliminates the entry barriers to high-yield real estate investments. Learn more about owning a fractional real estate asset here.

Despite being a high yield investment opportunity, entering the real estate market in Canada is considered a pipeline dream by most millennials due to high costs and student debts.

According to a recent Canadian KPMG study, 72% of millennials say their goal is to own a home. The study polled 2,500 Canadians, including 1,000 millennials between the ages of 23 and 38, who are now the most populous generation in the country.

The study also showed that 46% of millennial homeowners received a financial boost from their parents that allowed them to buy a home. Further, 38% believe their house won’t be worth as much in the future.

This data showed that millennials are earning more than earlier generations due to their higher education levels. However, they are not necessarily better off. Purchasing a home has been the most trusted way to build generational wealth, but it is trickier today than ever.

“It seems pretty clear that millennials are in a unique situation in terms of their ability to purchase a home,” says Martin Joyce, Partner and National Leader of Human & Social Services at KPMG.  “Purchasing a home has historically been a foundation for retirement stability.”

For many millennials, the idea of taking on a huge mortgage right after paying off student debt feels like debt deja vu. But a lifetime of renting means that they miss out on the opportunity to invest in the real estate market, which has been the most stable investment pool and retirement fund.

Many millennials save for a down payment and qualify for a loan, but lack the knowledge of the process to purchase and maintain a home. Plus, they’re wary of hidden costs and issues.

Fractional Real Estate Investments

In response to this predicament, new solutions have emerged to tap into the  real estate market. Canada has seen a boom in fractional real estate ownership, which lets you invest in a share of a high-yield property. These properties are selected after stringent due diligence and are selected to ensure high-yield returns so that a small sum can also become a long-term passive income source for millenials.

Khushboo Jha, the founder of the AI-powered fractional real estate investing service BuyProperly, was motivated to begin her own firm after she saw the obstacles in the real estate investment industry for small investors.

“The recent reports are an accurate description of the situation on the ground,” says Jha. “Every day, we meet with clients who have not had access to the market simply because it is designed to welcome high net worth individuals only. Another issue which concerns first-time investors is the fear of putting all their eggs in one basket. That’s why we welcome small investments and help clients diversify their portfolio’’

BuyProperly is a Canadian online exchange that aims to democratize real estate investing by making it accessible to everyone through fractional ownership.

in Editorial Posted by wpengine

4 Ways to Find the Ontario Neighbourhoods Poised for Peak Appreciation

4 Ways to Find the Ontario Neighbourhoods Poised for Peak Appreciation

Looking to invest in real estate? If so, how do you know which suburb is the right one to invest in?  As an investor, you’ll want to be in the know of neighbourhoods that have a high likelihood of appreciating.

We’ve broken down the four ways to know if an Ontario suburb is poised to beat the rest.

There are several neighbourhood statistics you can use to determine if a neighbourhood is up and coming:

1. Municipality demographics

Each city releases data such as crime and unemployment rates as well as the average household income. In particular, a declining crime rate is a good indication of an upcoming suburb. Typically unemployment rates and average household income can be found on a municipality website. Crime rates can also be found on a municipality or regional police website.

2. Ratings and rankings

It’s also a good idea to take a look at rankings from real estate and financial leaders such as ReMax and Macleans.

These websites not only look at statistical data, but they also consider factors like proximity to amenities and services, as well as walkability.

For example, ReMax releases a Canada liveability report each year that includes factors such as walkability, driveability, and access to green space. A suburb that is walkable and close to amenities and services like work, healthcare, and grocery stores is a good sign that it’s up and coming.

Maclean’s, also provides insight with their annual report on Canada’s Best Communities. In addition to an overall ranking, Maclean’s also provides rankings based on families, retirement, weather, and affordability. If a community is rising through the ranks on Maclean’s year after year, that’s definitely a community worth considering.

3. Construction projects and new buildings

Construction of high rise buildings

Although it can be a pain for current residents, construction and major developments means a thriving community. Revitalization and upgrading projects such as replacing street lights as well as fixing potholes and sidewalk cracks are healthy signs of growth.

To see what construction projects are underway, municipalities typically have a building and construction page on their website where you can see what projects are going on.

In addition to neighbourhood projects, major developments like a building restoration, high rise condominiums, and new office or retail space is a sign a neighbourhood is on the rise.

One way to find out about new construction projects is through the release of municipal building permits. New buildings and businesses are typically an indication of economic activity and a means to attract more people into a neighbourhood.

4. Sales data

House for sale

Real estate sales information can be used to measure a neighbourhood’s growth. Useful data points to look at include the average days listing spend on the market, average or median sales price, and total sales.

If there’s a decrease in the average days spent in the market, and an increase in the average sales price and total sales, that’s an indication of a growing market.

You’ll also want to look at the trends year after year in these data points. If the average days listed rate has trended downward over the years and the average or median sales price has been increasing over the years, that’s a sign of an upcoming market. Real estate sites like Zolo provide market insight into Canadian cities like Hamilton.

Knowing if a neighbourhood is in a buyer’s or seller’s market can gage whether or not a neighbourhood has a high likelihood of appreciation.

In a buyers market, there’s more supply and less demand meaning the buyer has the power to negotiate better deals. In a seller’s market, there’s more demand and less supply meaning the seller has the power to negotiate deals.

The sales-to-listing ratio in a seller’s market is generally at 60% or more, which translates to six or more sales for every ten new listings.

However, in a balanced market, the ratio is between 40% and 60%, and in a buyer’s market, you’re looking at fewer than 4 sales for every 10 new listings.

When researching upcoming neighbourhoods, you’ll want to know if it’s in a buyer’s market because you’ll buy real estate at a lower price and have a better opportunity for appreciation.

4 Up-and-coming neighbourhoods in Ontario

With the considerations mentioned above, here are four Ontario neighbourhoods we believe are on the rise:

Beasly, Hamilton, Ontario

Neighbourhood statistics 

Before the pandemic, Hamilton boasted the lowest unemployment rate of 3.7% out of all of the cities we analyzed in 2019. This trendy downtown Hamilton neighbourhood ranks number one as the most liveable neighbourhood in Hamilton in ReMax’s 2019 liveability report. The neighbourhood has a lot of  shops and restaurants and has a walkability score of 80.

Construction projects and new buildings

There are also currently 6 city revitalization projects underway in Beasly. There have also been 6 new high rise developments that have been recently completed.

Sales data

The real estate market in Beasly is a seller’s market. It’s hot with a 34% year-over-year increase in housing prices and has an average of 22 days that houses spent on the market.

Centretown, Ottawa, Ontario

Neighbourhood statistics

Before the pandemic, Ottawa boasted a low employment rate of 5.1%. Located right next to the University of Ottawa and only a 10 minute walk to Parliament Hill, it’s no surprise that Centretown is one of the top liveable neighbourhoods in Ottawa according to ReMax’s 2019 liveability report.

Construction projects and new buildings

Over the past year, new high rise condo buildings and restaurants have come up. In fact, the City of Ottawa currently has a city wide official plan to become a more compact and affordable city. Included in this plan are new high rise urban zoning provisions and various area traffic management measures in Centretown.

Sales data

The real estate market in Centretown is a buyer’s market. It’s booming with a 25.4% year-over-year increase from October 2019 to October 2020 and houses spend an average of 14 days on the market.

Kitchener Centre, Kitchener-Waterloo, Ontario

Kitchener Centre

Neighbourhood statistics

Before the pandemic, Kitchener also had a low unemployment rate at 5.7%. With a school of pharmacy and growing number of tech offices popping up in the area, Kitchener Centre ranks #1 as the most liveable neighbourhood in Kitchener according to ReMax. The neighbourhood has a lot of revamped buildings and has a walkability score of 89.

Construction projects and new buildings

The downtown core has seen a revamp in old downtown buildings which are turning into retail spaces as well as parking lots being turned into condos. In addition to the number of condo buildings going up, there are currently 6 city construction projects.

Sales data

The real estate market in Centretown is a buyer’s market. Kitchener itself has seen a 49.3% year over year increase from October 2019 to October 2020 in housing prices and houses spend an average of 12 days on the market.

Corktown, Toronto, Ontario

Corktown Toronto

Neighbourhood statistics

Although Toronto has a higher unemployment rate of 6.3% , it doesn’t mean that Corktown isn’t an up and coming neighbourhood. This suburb has been ranked one of ReMax’s top 10 liveable neighbourhoods in Toronto.

Construction projects and new buildings

The surge in development of this neighbourhood can be attributed to the Pan Am Games, where Corktown Common was used as the Athlete’s Village. Since then, the neighbourhood has been growing. A number of new high rises have been and are still being built despite the pandemic. There have been talks about a Corktown Station being added when the GO Train Ontario line is built.

Sales data

The Corktown is a seller’s market. It also has a hot real estate market with a house being listed on the market for an average of 9 days and a 15.6% year over year increase from March 2019 to 2020 in condo prices.

What does this mean for you?

Whether you are interested in personal home buying or investment real estate, these tools will allow you to effectively evaluate the value and potential of any given neighbourhood.

With these considerations, you’ll be able to discover up-and-coming neighbourhoods and achieve a high appreciation on your investment.

However, if you are looking for a simpler and even more reliable option, investing through BuyProperly could be a great option for you.  

BuyProperly works by allowing investors — both novice and experienced — to enter the real estate market through fractional investment. For as low as $500, you can own a piece of an investment property, without the burdens of putting together a hefty down-payment, finding and managing tenants, or dealing with property maintenance issues. 

BuyProperly assures investors that each property they acquire has been evaluated from top to bottom, starting with the methods highlighted in this article. BuyProperly’s goal is to make it as easy and risk-free as possible for you to invest. 

If you’re interested in real estate investing, but the property evaluation process is too much for you to deal with, rest assured that by investing with BuyProperly, all the research and evaluative work has already been done for you.

in Editorial Posted by wpengine

What is the Best Time to Invest? 4 Factors to Consider

What is the Best Time to Invest?
4 Factors to Consider

New to investing? Maybe you’ve heard of the investing technique of timing the market. In other words, you’re waiting for the right time so you can pay the lowest price on your investment. If you wait to pay the lowest price, you’ll gain the highest amount of appreciation. But is there such a thing as the best time to invest?

Best time to invest in the stock market

When it comes to investing in stocks, there is no such thing as the right time. Even experts don’t know the exact day, time, and year to invest. If you wait to invest or are trading too often, you’re actually losing. Since the stock market has ups and downs, investing in the market is all about the time spent in the market, not choosing the right time.

If you’re in good financial health and have extra cash on hand that’s sitting in the bank, start investing and invest regularly. The longer you’re in the market, the more your investments will grow. If you don’t know what to invest in or aren’t comfortable investing, start investing in a sector funds/ETFs or in the S&P 500 index. Remember not to invest more than you are willing to risk.

Best time to invest in real estate

Why should you invest in real estate when stocks can provide high returns? Real estate offers more stability than the stock market.

When it comes to investing in real estate, timing plays a more important role.

There are 4 time-related factors you need to consider before investing in real estate:

1. Financial health

Similar to stocks, you’ll want to make sure you’re in good financial health before investing. Make sure your debts are in control and you are not taking on more debt to finance a down payment. Additionally, you’ll want to wait to have the cash available to pay for a down payment. Being in good financial health will get your mortgage approved.

2. Buyer vs. sellers market

You’ll want to know the historic market trends of the city or neighbourhood you plan on buying in. In particular, you’ll want to know if it’s a buyer’s or a seller’s market.

In a buyers market, there’s more supply and less demand. This means the buyer has the power to negotiate better deals.

In a seller’s market, there’s more demand and less supply. This means the seller has the power to negotiate deals. To determine a buyer’s or seller’s market, you can look at “days on market” and trends in home sale prices. A low days-on-market rate indicates a seller’s market. A high rate indicates a buyer’s market.

An increase in home sale prices means it is a seller’s market whereas a decrease shows it’s a buyer’s market.

3. Time of year

You’ll generally find lower housing prices in the winter compared to the summer months.

Because of the holidays, there are fewer interested buyers in the winter, giving you an advantage in negotiating the price.

The second best time of the year is the spring, when there is an increase in the number of available properties. If you start early with your mortgage pre-approval,  you have a higher chance of securing a good deal faster.

4. External factors out of your control

Global events like a pandemic or the 2008 global financial crisis can affect real estate.

If you’re looking to buy a rental property, these events might impact your ability to find tenants and their ability to pay rent. Consider the risks of investing in a rental property during these times and purchase rental insurance.

While investing in the stock market can be risky and real estate can be a lot of upkeep, BuyProperly mixes the best of both markets. BuyProperly is a fractional real estate company that allows anyone to invest in real estate with just $500.

This innovative solution is like investing in stocks without the management that goes into real estate ownership. Ready to start investing? Head over to their website to start investing in BuyProperly.

in Editorial Posted by wpengine

Why Invest in Real Estate: 7 Key Benefits to Know

Why Invest in Real Estate: 7 Key Benefits to Know

Investing in real estate can be an incredibly rewarding and lucrative endeavour, but if you’re like a lot of new investors, you may be wondering why you should be investing in real estate and what benefits it brings over other investment opportunities.

In addition to all the amazing benefits that come along with investing in real estate, there are some drawbacks you need to consider as well.

We’re going to cover the 7 top reasons why you should be investing in real estate (and a few reasons you may not want to jump in right away!)

Opportunity for Cash Flow 

Purchasing real estate to rent out for additional cash flow is becoming a very popular investment strategy, and it’s easy to see why.

Not only do rental properties give you the opportunity to generate additional cash flow month-over-month, but they allow you to build up a portfolio of long-term, stable assets and benefit from all that appreciation over the life of your investments.

There’s another big advantage to cash flow: it provides an opportunity for new real estate investors to “house hack”.

It’s no secret that real estate prices are going up and pushing a lot of new investors out of the market. When you decide to purchase a rental property, you can use the cash flow to fund your living expenses and pay your mortgage down faster to continue investing in more real estate!

Many newbie investors buy duplexes or houses with additional dwellings to make extra cash to fund their real estate business.

If you’re looking for a way to buy into the real estate market without having to spend hundreds of thousands of dollars, check out the properties at BuyProperly. They use a fractional ownership model that allows investors to start with as little as $2,500.

High Return on Investment

Another major benefit of real estate investing is the ability to make a high return from buying, renovating, and reselling (a.k.a. house flipping).

Although this requires significantly more upfront cash than rental properties, there’s huge potential for profit if you buy the right property.

Most flippers look for undervalued buildings in great neighbourhoods. These properties need work (and money!) to get them up to average market value, but, once renovated, the returns from these resales can happen relatively quickly.

Appreciation 

The wonderful thing about investing in real estate is that the value of the property is expected to appreciate. The principal amount that you invested in the property will grow over time and should be worth more than what you paid for it when you purchased it.

Real estate is a fantastic long-term investment because it’s almost always guaranteed to appreciate in value.

Investors patient enough to buy and hold their properties will benefit from predictable appreciation year-over-year. Depending on where you buy, you can expect annual appreciation rates anywhere from 2-8%.

In Canada, there’s been an average of 6.11% annual appreciation over the last 15 years.

Tax Benefits

Another major advantage of investing in real estate is all the tax benefits you’re eligible to take advantage of!

Many investors can write off costs associated with depreciation, mortgage interest, operating costs, repairs, and property tax. These incredible tax benefits are a fantastic way for investors to save and build wealth.

For example, if you are charging $2,000 rent per month and you incurred $1,500 in tax-deductible expenses per month, you will only be paying tax on that $500 profit per month.  That’s a large difference from paying taxes on $2,000 per month.

The profit that you make on your rental unit for the year is considered rental income and will be taxed accordingly.

It is vital that you keep good accounting records on your investment property. If you are claiming maintenance and repairs, for example, be sure to keep those receipts as proof. If you are to be audited by the government and can’t supply the proof of expenses in form of official receipts, chances are you will be disqualified from claiming those tax deductions.

The appreciation of the property will be assessed when you dispose of the property and capital tax will come into play.

You will be taxed on the capital gains that you earned on the property from when you invested and purchased the property to the day you sold it.  The difference between the sale price and the price you paid to purchase will be the capital gain, which will be taxed, but only in the year that you dispose of the property.

Low Volatility

Real estate isn’t subject to the same volatility as other kinds of investments. Unlike stock trading, the real estate market isn’t like to have the same massive overnight shifts.

For this reason, it’s an option for people who want something more stable and predictable. It’s a great addition to a more risk-averse portfolio, making it an all-around fantastic investment.

It’s important to note that real estate investment doesn’t come without risk. The US housing market crash of 2008 showed investors the importance of not over-leveraging and making smart investment decisions when growing their portfolios.

Leverage Your Investment

One of the most appealing aspects of real estate investment is the ability to leverage your assets. In a nutshell, leverage refers to “the use of debt (borrowed funds) to amplify returns from an investment or project”.

This means you can put 20%, 10%, or even 5% down and control an asset worth significantly more than that.

It also means you have the ability to borrow against your assets to continue investing. This creates a snowball effect and, when done effectively, can skyrocket the value of your investment portfolio.

Passive Income

This last point ties into the other benefits we’ve mentioned above. Rental income aside, real estate accumulates passive wealth through its inherent tax benefits and long-term appreciation.

In addition, the rental income you collect can be done with minimal involvement and effort. With the right property managers and rental team, the ROI on your investment becomes relatively passive.

At BuyProperly, they help investors start with as little as $2,500 and see projected annual (passive) returns of 10-40%! Find out how.

What are the cons of investing in real estate?

Real estate is a fantastic investment to add to your portfolio, but it doesn’t come without risk. Here are a few things all new investors should consider before jumping in.

Upfront costs

It’s no secret that investing in real estate the traditional way takes a substantial amount of money. If you’re buying a property to live in, expect a minimum of 5% down plus closing costs. Most investment properties and second homes may even require a 20% down payment to buy.

Real estate isn’t cheap, and it’s important for new investors to be prepared for the costs.

At BuyProperly, they leverage a fractional ownership model to allow investors to buy real estate for as little as $500. This means they can get started quickly without having to wait and save up huge lump sum deposits for investment properties.

Sourcing deals

In addition to financial costs, investing in real estate comes with a significant time cost when you take into account sourcing property deals

Unlike buying and trading stocks which can be done with the click of a mouse, property investment often requires more time, research, and preparation.

Not only do you need to find great deals, but you need to analyze them and gather the necessary paperwork to get the deal done. On top of this, if you don’t have a good team in place, managing your repairs, maintenance, and tenants can turn into an overwhelming process.

Fortunately, sourcing great deals doesn’t have to be complicated. At BuyProperly, for example, they’ve created an AI-powered platform that allows investors to view, buy, and sell real estate digitally (much like they would trade stocks).

Difficult to unload

As much as we love real estate for its security and predictable returns, it’s not the type of investment that can be bought and sold quickly. In fact, the highest returns are earned when investors are willing to buy and hold.

If you think you may need to free up cash quickly, or if you’re looking for an exceptionally quick profit, real estate may not be your main investment vehicle.

Conclusion

Investing in real estate has several major advantages. In addition to cash flow potential, you can also take advantage of steady appreciation, reduced volatility, and investor tax benefits.

It’s important to remember that real estate is a fantastic long-term investment, and not well suited to people who want instant returns. It’s a reliable, predictable asset with great cash flow and ROI potential.

Real estate is a great addition to any investor’s portfolio.

Interested in learning how you can get started in real estate investing for as little as $500? Learn more at www.buyproperly.ca

in Editorial Posted by wpengine

How to Choose an Investment Property: A Step-by-Step Guide

How to Choose an Investment Property: A Step-by-Step Guide

So you’ve decided to buy an investment property! That’s great news – real estate is a sound investment that has the potential to provide long-term financial stability.

Real estate can be a good investment for those looking to diversify their portfolio and save up some passive income. If you are thinking about investing, it’s important to research the property market thoroughly. Since this includes many factors including location, size, and price, you may feel stuck wondering how to choose the right investment property that will give you great returns.

Before you can start buying properties, you need to figure out which property is right for you. In this article, we’ll outline the factors you need to consider when choosing an investment property.

Talk to other investors about their experiences investing in real estate

Investing in real estate is no small commitment. Speaking with other investors and learning from their experience is the best way to make sure you set yourself up for success.

Before you put down thousands of dollars on that perfect investment property, learn as much as you can from other investors. You may find that some properties are not worth your time or money, saving you a great deal of frustration in the long run.

Where can you find other like-minded investors? Look for online forums, search for Facebook groups, attend seminars, and join local business meetups.

BuyProperly is a tight-knit group of real estate investors. Want to learn more about how they help people grow their real estate portfolios? Visit BuyProperly now >>

Find out what type of property is best for your needs (apartment buildings vs. single-family homes)

As a new real estate investor, it may be hard to decide what type of investment property is best for your needs. But before you can decide which type of property to invest in, it’s important to figure out what kind of return you want to get on your investment.

Single-family and multi-family investment properties both come with their own unique challenges. Single-family homes are less expensive and often easier to manage upfront, but you may not see fast growth.

Multi-family properties, on the other hand, are much more expensive to purchase and require a higher level of management, but the returns will start rolling in more quickly.

The investment property you choose should be based on your goals and lifestyle.

Plan out your short term and long term investment goals

Before you can choose an investment property, you need to know what your goals are. Do you want to quit your job and work for yourself? Or are you just looking for passive income that can help supplement your existing salary? The first step is knowing what you actually want.

Once you’ve identified your short-term and long-term goals, use those to map out your investment portfolio.

Are you looking for properties under market value and that you can renovate and flip for a quick profit? Do you want to build a portfolio with more long-term, cash-flowing investments? Maybe you want a healthy combination of both.

Whatever you decide, let your goals guide you when searching for new investment properties.

Consider the location of the property

The location of an investment property is one of the most important factors to consider. This means that you should take into account the current demand for housing in that neighbourhood, as well as any future growth projections.

You’ll need to know how each neighbourhood stacks up against other areas in terms of safety levels and amenities.  You should also research average property values in the neighbourhood.

Once you have gained a deeper understanding of the local housing market, assess if there are certain areas that will be growing at a faster rate than others and analyze how your potential income property stacks up.

Research house prices in the neighbourhood

The key to a successful house flip is buying under-market value properties. The key to a successful rental portfolio is buying properties that have the potential to net a good operating income in relation to their purchase price.

Finding these deals means having a really good understanding of the current market conditions in your area.

It’s always best to purchase real estate in a “buyer’s market” to avoid overpaying for your property, but no matter what market you’re in, keep an eye out for diamonds in the rough and properties that look like they have the potential to increase in value.

Determine if you can afford monthly mortgage payments, taxes, insurance, and maintenance costs

If you want to invest in real estate, you’ll need to be able to pay for the costs of owning the property.

For instance, if you are buying an apartment, your mortgage payments may consist of property taxes, interest payments on your loan, and homeowners’ insurance. You should also consider things like one-time repair costs, ongoing maintenance, property management, and average vacancy rates.

The most important thing new investors should do is make a budget and have a very clear idea of how much not only the building itself costs, but how much the ongoing expenses will be.

Take into account any zoning or building restrictions

It’s possible that the property you have your eye on comes with some strings attached. You should make sure that the property has the appropriate zoning and permits for what you want to do with it. If you plan on carrying out any renovations, check city planning documents first to determine if certain renovations are allowed.

You’ll need this information later when you’re putting together a business plan.

Evaluate the long-term potential for rental income

The price you’ll pay for an investment property greatly depends on how much rent you’re able to collect. This is known as your return on investment (ROI).

You’ll need to consider current vacancy and rental rates as well as any factors that may affect demand for your apartment(s) in the future, such as nearby development projects, schools, parks, transportation, or popular bars and restaurants.

For example, if there is a new shopping mall being built, your apartment might become more desirable to renters after the mall is completed. This could increase your monthly cash flow by 5, 10, or even 20%.

Even if you plan on owning a property for several years, always keep an eye out for opportunities to make extra cash through rental income.

Speak with a realtor or mortgage broker about financing options

Your realtor and mortgage broker are experts in the field of real estate financing. They have helped many people buy homes before, and they can help you, too. Speak to them about any prerequisites — such as a minimum credit score — for qualifying for a loan and how much money you need to bring to closing.

Some closing costs to keep an eye out for include:

  • lawyer’s fees
  • property tax adjustments
  • utility bill adjustments
  • surveys and deeds
  • title search documents
  • appraisals

Don’t have enough cash to buy a property in your neighbourhood? At BuyProperly, they allow investors to get started for as little as $2,500 and see projected annual returns of 10-40%. How? They use a fractional ownership model with the mission to make real estate investing simple and accessible to everyone.

Learn more here.

Make sure that you have enough savings for emergencies like repairs or vacancies

You should also take into account any repairs that might be needed on the property, as you might have to dip into your emergency fund for this.

Here are some important questions to ask that any qualified home inspector will be able to give you information on:

  1. What is the age and condition of the roof?
  2. How old is the furnace and was the maintenance done regularly?
  3. What is the age and condition of the water heater?
  4. What is the condition of the windows?
  5. Are all the appliances in good working order?
  6. Are there any serious code violations that need to be addressed immediately?
  7. What is the general interior condition and are there any small repairs required?

Before moving ahead with your purchase, it’s important to seriously consider all the necessary repairs and budget accordingly.

Decide on property management

First, decide how you’ll be structuring the management for your new property. Will you rely on a management company, or are you buying something close by so you can take care of showings, maintenance, and emergencies?

The management structure you choose will depend on your lifestyle, knowledge, location, and availability.

If there is a property management company already established in the area, you should speak with them to determine what fees they charge for rent collection and maintenance. Find out average management rates in the area and factor that into your budget.

Consider long-term appreciation potential

We all know that real estate prices have been going up year after year, but before finalizing a purchase, you’ll want to take a serious look at what the long-term outlook is for that particular neighbourhood.

Pay close attention to large developments being built nearby. Is there an expected increase in demand? Will there be a new highway exit or a major retailer moving in? What has the average appreciation rate been over the last 5, 10, and 25 years?

Property appreciation is a tremendously important factor when building a profitable real estate portfolio.

Determine how much money you want to re-invest in new properties each year

When looking for a new property to invest in, you should consider how aggressively you want to acquire new properties and grow your real estate portfolio each year.

If you have a limited amount of capital, then perhaps begin by purchasing one or two smaller units per year until you have built up 10 units. Then you can re-invest profits to acquire more units over time.

On the other hand, if you’re looking for a high-growth rate return on your investment, you could consider purchasing 5 or more additional units each year, or looking into larger multi-family properties to see the returns accumulate more quickly.

Calculate the CAP rate

The CAP rate (also known as the cash-on-cash, return on investment, ROI, or COC) is used to determine how profitable a property will be in comparison to its purchase price. The formula for CAP rate is:

CAP Rate = Net Annual Cash Flow / Purchase Price

For example: if you buy a property for $300,000 and figure out that after expenses, the net operating income will be $15,000/year, your CAP rate is 5%.

What is considered a good CAP rate?

The industry average for a single-family home is between 6-8% while apartments are around 10%. However, cap rates depend on several factors such as location, property type, and market conditions.

What you look for as a real estate investor depends on your goals.

Have patience and remember that it takes time to make a profit in real estate

Remember that any purchase you make is an investment. While the early years of owning property may not be profitable, it’s important to be patient and hold on to your rental property for the long term, or at least 5 years.

Through cash flow from rental income, appreciation, and several fantastic tax benefits, you’ll build a stable and profitable real estate portfolio and increase your wealth at the same time.

Conclusion

Whether you’re looking for your first property or your tenth, the buying process doesn’t have to be overwhelming.

Remember that it takes time and patience when investing in real estate so don’t feel like you need to rush into a decision right away. Think about what type of investment is best for you. Whether it’s an apartment building with many units, a single-family home as a rental, or getting involved in flipping properties, each option will come with different levels of risk and reward.

Ready to find your next investment property? BuyProperly can help. They use a fractional ownership model that allows investors to start for as little as $500.

BuyProperly has taken that complex, time-consuming, and expensive process and simplified it. Using their expertise in the industry and AI technology, they find and acquire the best properties that will make top performing rental properties and excellent investment opportunities for you to build your wealth.

See their properties here.

in Editorial Posted by wpengine
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Flipping vs. Renting: Which Strategy is Better for Real Estate Investors?

Flipping vs Renting: Which Strategy is Better for Real Estate Investors?


When it comes to real estate investing, there’s a lot of debate about whether flipping or renting is the best way to go. Both options have their pros and cons, so it can be tough to decide which property investment strategy to start with. In this article, we’ll take a closer look at flipping vs renting, and help you decide which option is better for you.

The difference between flipping and buying to rent is that flipping entails selling a house after purchasing it (often after a few months), whereas with ‘rental income’ real estate investments are meant to be long-term.

Let’s dive into the pros and cons for both investment strategies so you can decide which one will help you reach your financial goals!

What is house flipping?

House flipping is when an investor buys a house, renovates it, and then, ideally, sells it for more than what they paid for it. The flipping process can be done very quickly – in some cases the entire flips can be done in only 4-6 months.

When flipping properties, the best strategy is to find and buy houses for below market value. These properties are normally in need of major renovation work which gives investors an opportunity to increase the value in a relatively short period of time.

The pros of house flipping

Many investors love the house-flipping model. Here’s why…

– Flipping offers a quick return on investment. Once an investor finds a property, it can be renovated, listed, and resold in a matter of months.

– There are different financing options available. Some investors qualify for renovation loans which allows them to spend less money out-of-pocket for their flips.

– It’s a repeatable process. Investors simply find houses below market value, renovate them and sell ASAP for more than the purchase plus renovation cost. This simple formula can be applied to 5, 10, 20, or even 100 properties.

The cons of house flipping

Although flipping houses can seem like a quick and lucrative way to invest, it’s not without risk. Here are some things to consider…

– Flipping can be risky. Large amounts of capital are tied to the purchase and there’s pressure to re-list the house quickly.  This may lead to mistakes that could be costly – such as paying too much for a property or renovating it incorrectly.

– Flipping properties is competitive! In order to be successful, investors need to find houses either below market value or with tremendous potential to be updated. Hundreds of other investors are also searching for the same thing, which can ultimately drive up prices.

– Flipping can be stressful and time-consuming. It’s a fast-paced project with several deadlines and moving parts. Many investors find the prospect of flipping to be too overwhelming for their lifestyle.

– House flipping relies on finding the right contractors. Investors who choose to rehab and resell houses must find reputable contractors who understand renovations, pricing, and project management. Hiring the wrong contractors can lead to bad renovation decisions, wasted time, overspending, and potentially, zero profit.

What happens when house flipping goes wrong?

Sometimes, rehabbing and reselling houses can go majorly wrong. The flipping process involves purchasing a property, renovating it and then selling it as quickly as possible to make a profit. If investors run into any issues during this process it can be costly.

Here are some common flipping fails to be aware of:

Getting over-extended

Flipping houses takes a significant amount of capital, and this can quickly take a toll on investors. Unexpected costs, miscalculations, and time delays can all eat into the bottom line and end up turning a simple house flip into a nightmare.

Buying the wrong houses

Because flipping is competitive, there may be a lot of investors bidding for the best houses and snatching them up quickly. You want to make sure you’re buying properties that aren’t overpriced or in need of too much work to be profitable.

Not finding flipping deals 

Making a lucrative income from flipping is 100% dependent on finding the right properties. Some investors either get impatient or they get overwhelmed by the competition and end up over-bidding on properties. Overpaying is a common mistake when investors are looking during a hot real estate market.

What is rental income real estate investing?

Rental income real estate investing is a strategy where investors purchase properties with the intent to rent them for a monthly income. This is also known as a buy-and-hold and is a more long-term investment approach.

The main difference between flipping and rental income real estate investing is that flipping entails selling the property immediately after renovation work has been completed, whereas with rental income properties, the intent is to hold onto the investment for a longer period of time – typically 5-20 years.

The pros of rental properties

Purchasing rental properties tends to be a more common strategy for most real estate investors. Here are some of the major reasons why…

– Rental income real estate investing is generally less stressful than flipping, as investors have more time to find and purchase a rental property due to the longer holding period. As a result, renting alleviates pressure from making quick decisions.

– Rental income investing is less risky than flipping. Instead of focusing on flipping for a quick profit, rental properties are meant to be held for multiple years which results in more time to make adaptations and improvements to the property when required.

– Buying rental properties can be inexpensive compared to flipping. The costs associated with flipping often include significant renovation fees and improvements. This means investors expect to put down an additional 20-30% of the purchase price for flipping costs. With rental properties, the capital can be put directly towards the purchase with an immediate opportunity for cash flow.

– With rental properties, investors get to take advantage of long-term property appreciation. At the same time, they’re able to generate consistent income in the years between property renovations or while the housing market is slow.

– Rental investors aren’t as affected by sudden dips in the housing market. A buy-and-hold strategy allows investors to weather the storm and wait for a more favourable market before deciding to sell.

The cons of rental properties

Although rental property investments can create a lot of financial security and stability, no investment strategy is perfect. Let’s take a look at some cons of buying rentals.

– Renting does not bring in money immediately. The income that you’ll be making will be spread over the entire time you own the property, which means the profit is not received in one lump sum as flipping would provide.

– Traditional rental income real estate requires large amounts of capital. Like flipping, purchasing rental properties does involve some costs (i.e. down payment brokerage fee, land transfer tax, legal fees, etc.).

– Rental properties are not as liquid as flipping, which means they cannot be sold as quickly and easily if a sudden need arises.

– Rentals take time and money to manage. Investors must choose to handle maintenance, repairs, showings, rentals, and emergencies on their own, or find a reputable property management company to handle the job.

Today, there are many options for investors to buy into real estate without the huge upfront costs. At BuyProperly, they use a fractional ownership model that allows people to buy real estate for as little as $2,500 to start. With this type of investment, you don’t have to dedicate time to finding tenants, managing the property, and taking care of all the operational details. Check out their properties to get started.

Which investment strategy is better for you?

Deciding between flipping and renting real estate comes down to your goals, lifestyle, and preferences. Flipping is a riskier investment strategy and certainly not for the faint of heart. It takes time and energy for finding, prepping, and selling properties, and it also takes time to learn the ins and outs of your local market.

Most people feel more comfortable starting with rental investments. They require less immediate capital and the holding period is longer, which provides more time for renovation work and improvements.

There are also fantastic tax benefits for landlords and investors to take advantage of the long-term appreciation on the property. Not to mention, owning multiple rental properties gives investors more leverage to continue investing and building their portfolios.

The bottom line is: rental properties allow you to grow a lucrative, stable portfolio and they’re perfect for investors who want to build wealth with predictable cash flow and appreciation.

Are rental property investments best for beginners?

The best strategy for beginners is the one that they’re most comfortable with. More often than not, this ends up being buy-and-hold properties like single-family and duplex rentals.  Real estate has historically shown dependable growth in property values, it has also been able to deliver consistent cash flow for those investors.

However, a major issue for many new investors is the time and dedication it takes to manage a rental property. But there’s no need to let this stand in your way. There are companies that can help take care of day-to-day management, rentals, and maintenance required to keep a property running smoothly, making your investment more passive than ever.

At BuyProperly, they make real estate investing easy and accessible for everyone using a fractional ownership model. Their mission is to enable investors to grow wealth through alternate asset classes. With real estate investing you are receiving a rent payment that is not only consistent in timing but also in the amount.

They provide regular investors with the benefits of investing in rapidly growing cities with huge capital appreciation without bearing the brunt of high real estate costs and the challenges of managing and operating a rental property.  They take care of everything – all you need to do is select the property to invest in and watch your investment grow.

Eager to learn more? Visit BuyProperly now >>

Conclusion

The bottom line is that flipping versus renting real estate depends on the individual investor’s preferences and lifestyle.

With flipping, you can generate wealth quickly – but flipping also requires a lot of time and attention to detail with no room for error. Buying rental properties takes longer to grow your income portfolio but carries significantly less risk. It’s normally a better choice for investors who are looking for a more passive income approach.

At BuyProperly, they love helping investors find rental properties that can generate passive income and grow their wealth.

If you’re interested in learning more about how you can grow your real estate portfolio without a massive cash deposit (or all the headaches) download their eBook here.

in Editorial Posted by wpengine

The 9 Types of Real Estate Investments

The 9 Types of Real Estate Investments

There are many types of real estate investments that are available for people ready to jump into the market. Many feel that real estate investing is a solid way to grow wealth with prosperous returns, and the outlook for the housing market in 2022 remains positive.

Fortunately, there are several ways to invest in real estate. No longer are you limited by the traditional barriers of entry like large down payments and excellent credit scores. There are now many different kinds of real estate investments that a person can pursue.

From residential and commercial to wholesaling and REITs, there are several ways to jump into the real estate market in 2022 and beyond.

Whether it is residential, commercial, or industrial properties, these tangible assets have provided countless investors with superior returns.

Let’s look at the various real estate investment strategies designed to give your portfolio a solid return.

1. Residential investing

Residential investing is likely the most common way to invest in real estate.  This is when an investor buys a single-family home, duplex, or multi-family building, and either flips it for profit or holds it as a rental property.

The purchase of this kind of real estate may be done with the use of financing or cash.

When people invest in residential real estate, they are typically purchasing a property to use it in one of four ways:

2. Long term rentals

In this situation, investors purchase a property such as a house, duplex, or apartment building that they rent out to tenants to live long term. This allows investors to maintain a steady cash flow and pay for expenses as the property appreciates in value.

The tenants are tied to a monthly rent payment (a lease) to live there, and the investor is the responsible landlord. The investor has the option of being the landlord themselves or hiring a property maintenance service to act on their behalf. Typically, tenants sign long-term rental agreements usually set for a year or longer.

3. Short term rentals

Vacation properties are ideal for this kind of real estate investment. Often, the investor will purchase a cottage, chalet, or vacation home in a highly desirable location and rent the property out on a weekly or monthly basis for guests.

This type of investment is ideal for vacation hot spots where the property will be in high demand. Again, the investor can manage the property themselves or hire a property maintenance service to take care of it for them.

When investing in rental properties, it’s also important to consider the tax implications. Because these properties generate income and are not considered a “primary residence”, owners should be aware of specific tax ramifications in their area. In addition, when investors sell these rentals, there will be a capital gains tax to pay on the sale.

Make sure to check your provincial and federal guidelines to learn more.

4. House flipping

The idea of house flipping is to buy a lower-priced fixer-upper property below market value and invest the time, energy, and money into renovating the property before selling it at a premium.

Provided the property’s purchase price reflects the amount of work that needs to be put into the structure (and allows for a profit), it can be a good way to invest in real estate.

This method of house flipping only works when you can sell at a profit, which would be the sale price less purchase price and renovation costs. The profit on the sale is taxable income.

5. New construction

Purchasing new construction is an option people consider during hot markets. Typically, the down payment on the property is required far in advance before the house is ready to inhabit.

Many investors purchase these new sales and resell them at fair market value when the home has been constructed and ready to inhabit. The idea is that the house’s fair market value would have appreciated from the time the down payment was placed to the time the home was ready to inhabit.

This income would be considered taxable.

6. Commercial investing

Investing in commercial property is another kind of real estate to consider. Typically, the investor purchases a commercial building to rent out to businesses.

Business owners also consider investing in this kind of real estate to own the building that they run their business out of. This saves the business on paying rent and, instead, they are able to put money towards building a very lucrative asset.

7. Raw land

Raw land is completely uncultivated and untouched real estate. It doesn’t have roads, houses, or any other buildings. Investors who choose to purchase raw land are taking a chance that, based on the location and projected market demand, this land will appreciate in value.

The more the price of the land increases, the higher return on investment (ROI) there is.

Many investors purchase raw land expecting to sell it to developers.

If someone purchases a piece of raw land and expects to wait years before they can capitalize on that acreage, then it’s important to consider that appreciation in price as opposed to immediate profit for this kind of real estate investment.

8. Third-party (crowdfunding, fractional, REITs, etc.)

Third-party real estate has become an intriguing option that makes real estate investing more accessible to people who want to invest in real estate but don’t have the down payment or credit rating to enter the market.

There are various types of third-party real estate investments such as fractional real estate investing and real estate investment trusts (REITs).

Fractional real estate is a collaborative group of people who pool assets together to purchase smaller shares of a property. The advantage of fractional investing is that these investors don’t have to know each other to get started. A platform like BuyProperly connects investors from across the country and allows them to pool their resources to invest in a property.

Being a fractional real estate owner means that you own a part of the investment, depending on your financial contribution, and you reap that reward on a fractional basis. This is passive income if you are not directly involved in the management of the property.

REITs are like mutual funds in the sense that there is a portfolio, or pool, of real estate properties that are managed by a management group. You can purchase shares in that investment and get paid out dividends on a per-share basis. The value of that share can increase over time as well.

9. Wholesaling

Wholesaling real estate can be a tricky endeavour, depending on where you live. A wholesaler is someone who pays cash for a property that has equity, then fixes the property up and quickly resells it to another buyer at an inflated price.

The key to being successful with this type of real estate investment is that you need to be able to purchase the property quickly and recover your costs within a short period of time.

What is the best type of real estate investment?

The best type of real estate investment is the type that you’re most comfortable with, falls within your budget, and meets your financial goals. If you want to invest in rental properties but don’t have enough capital for a whole building, then purchasing condos would be the next best option as opposed to just owning raw land or commercial buildings that do not generate income.

Fractional investing is also a fantastic option for people who don’t have the upfront capital or time to manage and oversee a rental property.

Conclusion

The bottom line is that real estate investing has earned a good reputation over the years as being a reliable way to get your money working for you. As you can see, there are many kinds of real estate investing opportunities at your disposal. It’s about finding an investment vehicle that is right for you.

Investing in real estate can be worthwhile as it has historically offered impressive returns through cash flow potential and long-term appreciation. Real estate is a great way to diversify your investment portfolio.

Whichever way you choose to invest in real estate, be sure to do your research, educate yourself on the pros and cons of the investment, and make an informed decision before you jump in.

If you’re ready to find your next investment property, BuyProperly is here to help. At BuyProperly, they use a fractional ownership model to help investors get started for as little as $2,500 (plus, they can see projected annual returns of 10-40%). 

Interested in learning more? Visit www.buyproperly.ca >>

in Editorial Posted by wpengine

11 Real Estate Investing Mistakes to Avoid

11 Real Estate Investing Mistakes to Avoid

Investing in real estate can be a great way to secure your financial future, but it’s important to avoid mistakes that can derail your success. In this article, we will discuss some of the most common mistakes that real estate investors make and how to avoid them.

Here are 11 mistakes you’ll want to avoid as a successful real estate investor.

1. Overpaying for a property

 

Investing in real estate can be a great way to build wealth over time, but it’s important not to overpay for a property.

One of the biggest mistakes that investors make is paying too much (or getting caught in a bidding war) for a property. When you pay too much, you are limiting your potential profits and could even end up losing money on the investment.

To avoid overpaying for a property, be sure to do your research and know what properties are worth in the area you are investing in. Don’t get caught up in the excitement of the purchase and end up paying more than it’s worth. Even if you find a fantastic deal, don’t be afraid to let it go.

 

2. Not doing proper research

 

Another common mistake that investors make is not doing proper research. Before buying a property, be sure to have a solid understanding of the market conditions, the rental potential of the property, and what you will need to do to get it ready for tenants.

If you don’t do your homework before buying a property, you could end up losing money on the investment. The best way to avoid this is to gather as much information as you can before making an offer so you know exactly what to expect. Do your research on the market conditions, the property, and the neighbourhood before making an offer.​​​​​​​​​​

3. Trying to do everything alone

 

Successful investors know they need a team of professionals working alongside them to build a lucrative real estate portfolio.  Trying to do everything yourself is a recipe for disaster.

When you try to do everything alone, you will likely make mistakes and miss out on potential opportunities. Instead, build a team of professionals who can help you with every aspect of your real estate investing. This includes lawyers, accountants, contractors, realtors, and more. By working with a team of professionals, you will be able to make more money and avoid mistakes.​​​​​​

At BuyProperly, they use an AI-powered platform to help match investors with high-performing investments. They use a fractional investment model to allow investors to buy in for as little as $2,500, and they take care of all the property management and necessary legal paperwork.

4. Making emotional decisions

 

One of the biggest traps investors fall into is making emotional decisions. When you buy a property based on your emotions, you are likely to overpay or make other mistakes that can hurt your bottom line.

To avoid making emotional decisions, take some time to think about the purchase and what it will mean for your business. Make a list of pros and cons and be sure to think about the long-term implications of the investment. If you are still not sure, it’s best to wait until you are 100% certain before making a decision.

​​​​​​5. Underestimating repair costs

 

Investors often underestimate the repair costs of a property, which can lead to losing money on the investment. When you buy a property, be sure to factor in the cost of repairs and renovations.

If you don’t have enough money set aside for repairs, you could end up taking a loss on the investment. To avoid this, make sure you have a realistic estimate of the repair costs and be prepared to pay for them out of pocket.

This is where working with professionals really pays off. If you’re not sure how to calculate repair costs, bring in home inspectors, contractors, and licensed professionals to give you accurate estimates.

6. Buying in a bad neighbourhood

 

Another mistake that investors make is buying in a bad neighbourhood. This can negatively impact rental incomes, vacancy rates, and resale value.

When you buy a property in an undesirable or unsafe neighbourhood, you are likely to experience high levels of crime, vandalism, and other problems.

To avoid this, do your research on the neighbourhoods where you are thinking about investing. Make sure to check out the crime statistics, school ratings, and other important information. If a neighbourhood doesn’t meet your standards, don’t invest in it.

​​​​​​​​Instead, look for neighbourhoods that are growing and have a lot of potential. These areas are more likely to experience positive growth in the future, which will translate into higher rents, fewer vacancies, and greater appreciation.

7. Investing without a plan

 

Another mistake that investors make is investing without a plan. This can lead to money being wasted on bad investments and missed opportunities.

To avoid this, create a detailed investment plan before buying a property. The plan should include your goals, strategies, and how you will measure success. When considering your budget, it’s also important to ensure the mortgage payment, repairs, and emergency fund can be covered by the rental income.

By having a solid plan in place, you will be able to make better decisions and avoid mistakes. You will also be able to stay focused on your goals and achieve them faster.

​​​​​​​​Creating a plan is essential for any real estate investor, so don’t skip this step.

8. Not having enough cash reserves 

 

Investors often make the mistake of not having enough cash reserves. This can lead to them being forced to sell a property in a hurry or take out a loan, which can be costly.

To avoid this, make sure you have plenty of cash saved up so you can buy properties without having to borrow money. You should also have money set aside for repairs and other unexpected costs.

If you don’t have enough cash saved up, it’s best to wait until you do before investing in real estate. The last thing you want is to get into a financial bind that forces you to sell a property at a loss.

​​​​​​So, how much cash should you have set aside when you buy a property? Aside from your down payment and closing costs, aim to keep an additional 5% set aside for repairs, maintenance, and emergencies.

At BuyProperly, they use a fractional investment model that allows investors to get started for as little as $2,500. This eliminates the need for a huge cash downpayment and the fear of getting hit with unexpected repair costs.

See their properties here.

9. Paying too much in fees 

 

Another mistake that investors make is paying too much in fees. This can include broker fees, closing costs, and other expenses.

To avoid this, be sure to shop around for the best deals on fees. Ask your real estate agent about their commission, get quotes for title insurance, and compare rates for home inspections.

By shopping around for the best deals, you can save yourself a lot of money in the long run.

10. Not setting short-term and long-term goals

 

Before buying an investment property, it’s important to know your financial goals. If you’re looking for quick returns and you’re available to put more time into your real estate investment portfolio, a buy-and-flip could be a great option.

If you’re looking for long-term wealth, a  buy-and-hold strategy may be better.

Successful investors know their goals ahead of time so they can find the right properties to grow their portfolios.

Not having short-term and long-term goals can lead to costly mistakes, so make sure you know what you want before investing in real estate.

11. Quitting too soon

 

One of the biggest mistakes that investors make is quitting too soon. This can be due to a number of reasons, such as not having enough money saved up or experiencing some early losses.

To avoid this, set a goal for how long you will stay in the real estate market. If you’re just starting out, give yourself at least five years to make mistakes and learn from them.

By setting a goal and sticking to it, you’ll be more likely to succeed in real estate investing. Remember, Rome wasn’t built in a day.

Conclusion

 

Have you made any of these mistakes when investing in real estate? If so, you’re not alone. But don’t let it discourage you.

Investing doesn’t have to be overwhelming, frustrating, or even costly. Learn how you can get started investing in real estate for as little as $2,500. Visit  www.buyproperly.ca.

in Editorial Posted by wpengine

The Pros and Cons of Investing in Single-Family Homes

The Pros and Cons of Investing in Single-Family Homes

There is no doubt that investing in real estate is a smart move for anyone looking to secure their financial future. But when it comes to building a lucrative real estate portfolio, there are a few different options to choose from.

One of the most popular choices is investing in single-family homes. In this article, we will take a look at the pros and cons of investing in single-family homes to help you decide if this is the right type of investment for you.

First, let’s define the main types of residential investments:

Single-family: A property that has one available dwelling to rent.

Duplex: A property that has two available dwellings to rent.

Multi-family: A property that has three or more available dwellings to rent.

Let’s start by looking at all the pros of investing in single-family homes.

 

High Returns

 

Single-family homes are a great choice if you’re looking for steady appreciation with a good return on investment.

In most cases, you can expect to make around 12% on your investment each year. Don’t forget, you’ll have maintenance and operating expenses and potentially regular mortgage payments as well, which we’ll discuss in a moment.

That’s a pretty good chunk of change. And remember, investing in real estate isn’t just about getting rich quick — it’s about investing for the future.

If you plan on holding on to these properties indefinitely, then single-family homes are a great choice because they tend to appreciate quickly over time.

For instance, if you buy a property today for $100,000 and sell it 20 years from now for $200,000 then that’s an average of 12% appreciation per year.

If you held on to your investment property indefinitely, the value would continue to increase at this rate while other investment options (like stocks) might plateau.

Easier to Get Started

 

Another pro of investing in single-family homes is that it is a very easy way to get started. Unlike multi-family homes that may require hundreds of thousands of dollars to buy, single family homes are less expensive and therefore easier to acquire.

You don’t need a lot of money to start building your real estate portfolio and you can begin to see returns pretty quickly.

But perhaps you don’t have enough for the mortgage down payment. If that’s the case, then you could consider the opportunity to invest in a fractional share of a property. At BuyProperly, they help investors like you get started in real estate investing for as little as $2,500. Learn more here.

Stable and Secure

 

The market for single-family homes is always growing. Even if the economy takes a turn for the worse, you can still expect to make money off of your investment. Unlike investing in stocks or other forms of investments, real estate is something that normally retains its value no matter what the market is doing.

Maintenance and Repair Costs

 

A big benefit of single-family investing is that repair and maintenance costs are often lower than what you would pay with larger buildings.

Instead of having multiple units to look after, investing in single-family homes means you only have one unit  to worry about. Plus, you can often do the repairs yourself to save even more money.

More Control

 

Investing in single-family homes gives you more control over your investments.

For example, if you buy a single-family home and then decide that investing isn’t right for you anymore, you can sell it at any time. You have more control over the investment and how long to continue investing. Plus, since they appreciate quickly over time with little upkeep required from an investor point of view, this means less stress when investing.

Less Risk

 

Single-family homes are a great way to get started in real estate investing without taking on too much risk.

The market for single-family homes is always growing, so if your investment doesn’t go as planned, you can still sell it down the road and make most of your money back.

Easier to Manage

 

Another pro of investing in a single-family home is that it is much easier to manage than a larger property. It’s often easier to find a property management company and the fees are substantially less than you would pay with a larger building. You also don’t have to worry about hiring and managing staff, which can be a big hassle.

Less turnover

 

Single-family rentals tend to have long-term tenants with less turnover than lower-priced units in a multi-family building.  Long-term tenants are more stable and will pay their rent on time, which means less stress for you.

Multiple vacancies can become an issue with larger properties and can really eat into your profits.

Diversification

 

Because single-family homes are less expensive than large buildings, it’s easier to continue to invest and add more homes to your real estate portfolio. That means you can diversify and reduce the risk of sudden vacancies and non-paying tenants.

As you can see, there are several pros to investing in single-family real estate. But, like any investment, it doesn’t come without some risk.

Cons of Investing in Single-Family Homes

Now that you have a good idea of the many benefits of investing in single-family homes, let’s take a look at some of the cons of this type of real estate investment.

Sourcing Deals

 

The main con of investing in single-family homes is that it can be difficult to find good deals. Because this is such a popular choice, the competition is fierce. So you need to be prepared to do some digging and put in some work if you want to make a profit.

Takes time to generate a return

 

With single family homes, it can take a while to see a return on your investment. It’s not uncommon for it to take at least five years before you start seeing any real profits.

Remember that although you’re always able to collect rental income on your investment, much of the benefit in single-family home investing comes through the capital appreciation over time.

Flip & Sell Risks

 

“Flipping” houses (buying and selling them quickly for a profit) can be risky.  If you’re not careful, you could end up losing money on a flip.

Another con to flipping is that it’s often difficult to find good deals – the same issue we mentioned before. Plus, if the market takes a downturn, you could end up losing money on the sale.

Vacancy rates

 

Unlike multi-family home investing with several units to generate income, single-family home investing means you’re buying only one unit to rent. If a tenant doesn’t pay the rent or leaves the property, you could suddenly find yourself with a 100% vacancy rate, which can significantly eat into your return on investment.

Management

 

Another downside is that it can take a lot of time and effort to manage all of the different aspects of owning and managing multiple single-family homes. Two or three properties can be extremely easy, whereas 10, 15, or even 20 single-family homes can mean a lot of traveling for your management company!

If you are planning on managing the property yourself, you’ll also need to be within a reasonable commuting time to this property to deal with any issues.

Less Leverage

 

Lastly, investing in a single-family home usually doesn’t provide as much leverage as investing in a larger property.

In the real estate investing world, leverage means using other people’s money to fund your investment.

For example, with single-family investing, you may only be able to get a loan for 50% or 60% of the purchase price. Whereas with investing in a larger property, you may be able to get a loan for up to 80% or even 90%.

This is because investing in larger buildings means investing more money, and investing more money means investing more risk.

The bank doesn’t want to be stuck with all the risk if something goes wrong. So they’re more likely to loan you money when you’re investing in a larger property.

This means you can’t make as much money on your investment if it goes up in value.

Are single-family homes the right investment for you?

 

It all depends on your goals and what you’re looking for in an investment. If you’re prepared to do some work sourcing good deals, investing in a single-family home can be a great way to get started in real estate investing. They are stable and secure, have lower maintenance costs, and are easier to manage than larger properties.

However, keep in mind that it can take a while to see a return on your investment. So if you’re looking for something that will generate income quickly, single-family homes may not be the best option for you.

Conclusion

 

Overall, investing in single-family homes is a great way to secure your financial future. It is a stable investment that has the potential to make you a lot of money over time. However, it is important to remember that there are some risks involved, and it does take some effort to manage everything.

If you are willing to take on these challenges, then investing in single-family homes is definitely something you should consider.

Looking for your first (or next) real estate investment? At BuyProperly, they use advanced AI technology to help match investors with lucrative investment opportunities. They use a fractional ownership model so you can get started for as little as $2,500 (and see projected annual returns of 10-40%).  With this approach, BuyProperly makes it easy to invest in multiple properties and locations to diversify your investment portfolio and build your wealth! Want to learn more? Visit BuyProperly.

in Editorial Posted by wpengine

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