Real Estate Investment ~ A Short Story

Real estate investing makes sense when there is the assurance of monthly returns or good profits on sale/ resale of the property. It does not stop at that. The returns should be positive and comparative with other properties in the area that have the same or similar features.

Canadian Real Estate Investing Guide

As mentioned above, cash flow is the principal consideration that must be done before venturing into this sector of investment. Once you are assured that positive income will be generated through the same, you can prepare a flow chart covering your forthcoming endeavor in the real estate.

It would be wise to start with due consideration of your objective for the investment. A long term investment will generally pay off very well. Understand how you can control your finances to get the most out of the same. Do consult experts or people with experience in this field to find out how you should calculate and use tax deductions associated with property investments. Remember that mortgage is paid down every month.

You could evaluate how much down payment you are contributing toward the investment property. In Canada, since the year 2006, this amount has been set at about of 5-10% of the value of the property. The Canadian banks offer standard mortgages on the same. Then you have to consider the carrying costs, the amortization period, the insurance thereon, the property taxes and other costs. After you deduct all the above amounts from your expected rent amount, you can find out whether you can still avail a good cash flow on the property. It will be necessary to, of course consider that there could be unexpected or routine maintenance charges (like costs incurred for repairing leaking pipes, servicing various appliances, etc.) in the year that you will have to bear. This has to be included in the above considerations. Hence with this background, when any urgent repairs crop up, you are financially ready for coping up with the situation at hand; unlike a novice in this field who, being caught unawares and at a loss to fend for self when such circumstances arise, feels that his investment was a failure.

It is important to realize that tax deductions, after being written off against other income, can be beneficial in the form of refunds. Fees for legal compliances, insurance, land transfers, maintenance costs and property taxes come under this category. Plus, the monthly mortgage paid gives you equity amounts. If your aim is a long term investment, there is a fair chance of reasonable property appreciation, unless the area has lost demand due to certain reasons. Property depreciation should also be taken into account.

Property Investment Tips 

1. Due research in the market is essential before you delve in this segment.
2. Explore the various financing options and the investment strategies.
3. Take the help of experts in this field to guide you through the process of investing. Reliable home valuators can be considered.
4. It is necessary to prepare a portfolio of the property investment.
5. The equity in your home can be used for securing loan in the investment property.
6. As per your financial position, it would help if you analyze the forthcoming income and expenditure and prepare a balance sheet of the same.
7. Possibilities for capital as well as rental growth should be considered.
8. The location plays an important role. It should be in an area that has demand for rentals. The specific details as regards the number of rooms and their types should be researched. Good infrastructure, areas developing in the next couple of years that will be easily accessible to centers of essential daily needs and transportation should be preferred.
9. Refrain from properties that are in areas already developed, because by the time you buy them, the potential for further growth could be nil as it may have already peaked by that time.
10. Save up for a minimum of half a year’s mortgage payments, because, in all possibility, you may not be easily able to get a tenant in the initial stages. Additionally, you may also need some money for unexpected repairs and/ or maintenance work.

Real Estate Market Trends

The housing market was quite low in the year 2012. Foreclosures starts have been seeing a decreasing trend through the year. But now banks are aiming for selling into positive trends in the housing market after having observed that investors are buying properties; over-bidding on the same; thus boosting the prices. If the market gets flooded with rental supply, this will cause the rents to lower down. Still, buying for flipping is being done and this pushes properties for rent or sale at the backstage. For the same, the mortgage rates have been lowered and the rent amount along with housing prices have been pushed up. However, solid economic fundamentals do not drive this trend, especially at the level with which the prices are increasing. It would be interesting to observe the market trend of this momentum that will be carried forward as we enter into next year.

The year 2012 did not see any growth in the income of the average citizen. Yes, rental prices were quite appreciable and traveled an upward trend. Therefore a major portion of the household income was spent on rental housing and the low income group was badly hit due to the same. New homes sales; though modestly rising, are still suffering and related jobs are hard to find. The market trend going into 2013 could see a small rise in the sales of new housing starts. Mortgage rates will also have to be considered along with how the rental market will be viewed by investors. On account of the lowered interest rates, the demand for loans has been very high. This trend is expected to continue in the next year.