If you are looking to make an investment that can provide a good return on your money, you should consider investing in real estate. Owning investment property gives you rental opportunities which will provide ongoing income and cash flow plus potential tax benefits. Whether you purchase a single family home, condominium, or a multi-family dwelling, you can generate monthly income as well as property equity. So how do you get started? Here are a few things to consider first.
The first thing you need to do to get started in real estate investing is to create a financial plan.
- Check your credit history and make a plan to get it in shape if it’s not great. You can improve your credit score by making sure you pay all your bills on time every month, pay them in full or at least make the minimum payment, and don't go over your credit limits. Once you have a couple of credit cards, avoid applying for more credit and absolutely no new credit for six months before you apply for a mortgage. Too many potential lenders processing inquiries on your credit in a short period of time can hurt your score.
- Start a savings plan. Determine how much you’ll need for the down payment and closing costs. Browse properties for sale in the area you are considering investing to get an idea of the average home price. This will help you to determine how much you'll need. You should also create some cushion in your savings to cover any incidentals after you close on the property such as needed repairs or rehabs to prepare it for rental. Starting a good saving habit now will help also you when you start getting income from the property rental so you'll be more likely to save it and plan for your future than spend it.
- Calculate your housing to income and debt to income ratios to assess your ability to make payments. If the home is vacant for a period of time, can you afford to cover the cost of the mortgage payment on top of the other monthly expenses? Mortgage companies are going to want to see that your finances won't be stretched if you have to cover everything yourself.
- Plan for additional expenses such as home owner association fees, utilities, additional insurance coverage, professional property management, unexpected repairs and ongoing maintenance.
As I’ve talked about in previous blogs, I am personally experienced in real estate investing and own investment properties in Edmonton. It's important to work with an expert who knows the area and the business. I not only recommend that you use a licensed real estate agent, use one who is experienced specifically in investment properties. A realtor who is experienced in investment real estate will be able to guide you in determining which properties will make the best investments and walk you through the process from start to finish. They will help you avoid any pitfalls or surprises and make the process go more smoothly. Ask your realtor how many investment properties he or she owns. If the answer is none, you should consult another realtor who has personal experience with investment real estate. Investment properties are my passion and I can answer any question you may have about it. I hope that when you’re ready to start investing that you call me to help you make the best investment you can make.