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If you’re the type of person that is interested in using the real estate market to your advantage to make extra money, an investment property can be a good opportunity. There are several reasons as to why more and more homeowners are putting their money into investment properties, mostly because it’s essentially a second income that requires minimal effort. Below are 5 key things to take into consideration before you make the leap into an investment property.
We’ve all seen those TV shows where they spend an ample amount of time and money on renovations to relatively unappealing properties in hopes that they can turn the house around and make a sufficient profit off of their hard work. The main thing to remember is the fact that today’s real estate market isn’t going to work in your favour if you want to flip houses. Instead, you’ll want to make sure that you buy and hold onto your investment. This can be more preferable anyway as your property can appreciate over time and offer a steady income if it is positively geared. Doing some minor improvements to a property to increase rental return can be a great option though. The trick is to not overcapitalise.
Most home owners that consider an investment property won’t be living on the premises before or after the renovations are done, so when you are qualifying for the mortgage there will be certain things to consider. One of these factors is the amount of money that you will have to put down on your purchase. It is important that you take the time to save up enough cash to have on hand when you’re ready to buy the property as most properties that aren’t occupied by the owner require at least 30% down.
If you’ve never been through the process of owning an investment property before you might think that renting a space out is simple, though that is a common misconception. When you make the decision to rent space out to tenants you will have to take several different costs into account, such as: utilities, repairs, maintenance, taxes, and insurance. You’ll also have to be prepared to foot the extra bills for the space in the event that you don’t have a tenant right away.
In the event of an altercation with the tenants on your property you might hear a lot about their rights, but as the property owner you have rights as well. Make sure that you do a sufficient amount of research to learn about the bylaws in your area pertaining to eviction and other issues that could arise.
Above all, you’ll want to make sure that you’re not putting yourself and your family in an insurmountable amount of debt because you’re taking on a new project that you’ve never tried before. An investment property can be a great opportunity for financial gain, but you will want to talk to a real estate and Finance professional to make sure that you’re making the right decision.
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