There are many things that you should consider when buying an investment property, such as investing in a residential mortgage in Ontario. It should also be noted that while people can make money by buying and selling real estate properties, the world that is depicted in reality TV shows that focus on house flipping is not how the real world works.
If you would like to procure a residential mortgage in Ontario and are interested in buying an investment property, then there are certain things that you should consider first.
What is its condition?
Some people may opt for a fixer-upper property due to the low initial investment. They may see potential in either the home or neighbourhood in which it is situated. However, you need to think in the long-term, as investment properties are a marathon and not a race. Ask a licensed and bonded home evaluator to inspect the property from top to bottom.
You will also need to determine how much of the work will require outsourcing and how much you will be able to do on your own. All serious issues must also be rectified before anyone moves in, as an unsafe home can lead to sick tenants and possible lawsuits that will mitigate any profits that you may have made from your investment.
Follow the 1% Rule
While every investor likely has their own unique goals and objectives when it comes to investing in real estate, most experts believe that the money that is made from a property needs to adhere to the 1% rule. For those who are unaware of what the 1% rule is, imagine that you just bought a home for $100,000. According to the 1% rule, your home would need to generate $1,000 per month to be a worthy investment.
The general rule of thumb is to only invest in a property that follows the 1% rule. You may still invest in a property that doesn’t; provided you expect the neighbourhood to rapidly expand in the not too distant future, which will allow home values and rent prices to increase significantly in the next few months.
Find Out About Property Taxes
Property taxes are also something that you will want to consider before you invest your hard-earned money into a new property. For instance, low property taxes will allow you to keep a large proportion of your rental income every month, while taxes that are elevated will quickly eat into the profits that you generate. Furthermore, the norm is that property taxes will be lower in rural areas, while they tend to be higher in metropolitan areas.
Even the seemingly perfect house, situated in the seemingly ideal neighbourhood, may be a poor long-term investment if the property taxes are too high.
If you would like to learn about other factors that you should consider before investing in a property, call Northwood Mortgages at 866-307-0747 or contact us here.