I was always told that Real Estate is the best investment you can ever make in your life… and when were talking about hundreds of thousands of dollars that you want to see grow, the soundest place you can put it is in the Real Estate market. With Real Estate investing you can watch your dollar grow and return without the day to day worry of how the market is doing, unlike when investing in stocks and bonds. However as great as it sounds there are some things you need to keep in mind when making real estate investments.
Financing
The largest part of investing is without question is the financing of the property. Real Estate is not like operating a retail store where you buy products at whole sale costs of $50.00 and re-sell it at a marked up price of $100.00.
You need to begin by deciding what you would like to do with the property, what are your goals? Are you looking for a long term rental income investment? Or are you looking for a short term flip?
If you are looking for a short term flip an adjustable mortgage with a very low temporary interest rate may be a good idea. Adjustable rate mortgages have been known to be the foundation of a lot of problems but if you are sure you can sell for a profit, keeping in mind that with short term flips you will have capital gain taxes and Real Estate agent fees to pay when selling the property, you can maximize your income flow by paying only the interest. If you are looking for longer-term real estate investments, fixed mortgages are the best way to go because they allow you to budget accordingly even during tougher times such as periods where the property is vacant between tenants.
When investing in long term periods (leasing the property) you must remember that the rental income you make from the property must exceed your costs to hold the property, taxes, mortgage payments, and maintenance fees if purchasing a condo. What you must also do when investing in rental properties or quick flip real estate is, make sure you are using all of the tax benefits of depreciation and valid expenses of owning these properties and using them to make money. It is best you speak with your accountant and lawyer for legal and tax advice before making that first investment…
Andrew Costa
Sales Representative with Signature Service/GMAC Real Estate
www.andrewcosta.ca
