Investment Real Estate Questions

1. What is a good investment?

A good investment in my mind is one that produces or has the ability to produce adequate cash flow to hold the property. By using this simple evaluation method you are enabling yourself to withstand a reduction in rents if that possibly occurs.

2. How much do I need to begin investing in real estate?

Typically most banks are looking for you to put a down payment of 25% - 35%. However, you can by investment property with no money down by also financing your down payment. This can be done by taking an equity mortgage on your existing property, using an unsecured line of credit (usually higher interest rate), or by a vendor take back on the property. Alberta is the only province in Canada that allows buyers to assume existing financing without qualifying for the mortgage however banks are putting in clauses to new mortgages to ensure people are not flipping mortgages to other individuals. From time to time we see properties that would make excellent investments with high amounts of financing on the properties. These properties can sometimes be had with minimal down payments but it really limits your choice of properties. Most times it is best to find the right rental property.

3. Is Calgary a good market to invest in real estate?

Calgary is an excellent market to invest in real estate for the following reasons. 1) Calgary continues to be one of the fastest growing cities in the country. 2) The number of rental properties in the city has remained stable for a number of years. 3) Rental rates will continue to climb and vacancy rates will decline as demand outpaces supply.

4. How do I choose what type of investment property to purchase?

There are many types of investment properties to choose from houses to apartment buildings to condominiums. Choosing the right type of property for you depends on how much work you are willing to do on each type of property and how much return you are willing to sacrifice. When someone comes to me and is looking to buy investment property but is still working I often talk to them about the advantages of owning condominiums. In a condominium you are responsible only for the interior maintenance and the leasing of the property. This is less work than a house where you also have exterior maintenance as your responsibility. You do pay condominium fees to maintain the exterior and landscaping but at least you know that your exterior will not be left and often these would be costs that you would need to deal with on the other types of properties as well.

5. Are there other advantages to owning a condominium property as an investment property?

Other advantages include the ability to pick and choose good locations in good complexes. Since there are many condominiums for sale you have a wider selection of properties to choose from. You can be more selective on location and style of the unit. Another advantage is the fact that when you go to sell you are selling into a more liquid market than the apartment building market, allowing you to dispose of your investment in a shorter period of time.

6. What is a good time horizons for holding investment property?

I often tell my clients that when you look at purchasing investment property you should look at a time horizon of no shorter than 5 years. Time is game when it comes to investing in real estate. The longer you have the property the more it will appreciate in value and the higher your rents will be allowing you to obtain a good cash flow. Most of my clients have never sold their investment properties.

7. What are the biggest risks of owning investment real estate?

The biggest risks to owning investment properties are forced sales in a short period of time and vacancies. The expenses are high to buy and sell properties. You have lawyer and real estate fees that are expensive and if you are forced to sell before your property has gained equity you may be in a loss position. The other major culprit is vacancies. It is important to choose properties that are attractive to potential renters. Keeping units maintained and fresh play an important role in obtaining and keeping good renters.

8. How big a problem are bad renters?

Problem renters will turn a great investment into a head ache. The best way to avoid problem tenants is to properly screen your tenants before allowing them into your property. You can check credit, previous landlords and current employers. Ensure you have a good security deposit and never let anyone into your properties that can not make their security deposit or first months rent. Good management will send make these renters someone else's problem.

Contact Me

If you would like to discuss the possibility of investing in real estate contact Real Phaneuf. He will be happy to discuss this wealth building strategy in more detail so you can decide if this is the right option for you.