Investment Properties 101
The housing market is an intricate
web made up of different types of investments. The most basic approach to
property ownership is to buy a house and live in it with your family. However,
many homeowners use the real estate market to invest in and turn a profit. An
investment property can be a long-term endeavour or an intended short-term
investment. This is the case with what is known as "flipping” a home – real
estate is bought, remodelled and renovated for a quick turn-around and sold for
a profit. There are many opportunities to get into the market! With an
"Investment Properties 101” type of guide, answers to some questions may open
your eyes to this wonderful opportunity!
Investment Property vs. Second-Homes
Some confuse investment properties with
second-homes. This is not always the case. An investment property is real
estate that is not your primary residence and is used to generate income.
Investment properties also provide advantageous tax benefits. A second-home is
a secondary residence that you and your family will use in addition to your
primary residence. Think of a summer home or the cottage as a perfect example
of a second-home. The property will be kept for the enjoyment of the owner
exclusively and not rented out on a leased agreement. It can’t be used either
for any time-sharing schemes.
Different Types of Investment Properties
Residential Property – This would be a rental property that would
be owned and then leased to a tenant to make a profit. In Mississauga and
Brampton, these would include condominiums, townhomes, semi-detached and
detached homes. According to RentBoard.ca,
rent rates range from $850 per month for a 1 bedroom unit to as much as $1,600
per month for a 3 – 4-bedroom unit. That is quite an opportunity to make some
income on an investment property!
Commercial Property – These types of buildings would host space for
businesses. Office buildings, industrial warehouses, retail or restaurant space
or some vacant land that can be bought for commercial use in the future; all
fall into the commercial property classification. Partner with a brokerage who
specializes in, or who has agents who specialize in, commercial properties and
the regulations that rule that realm of the real estate market.
Flipping Homes – When it comes to Investment Properties 101,
flipping homes should have its own course! A savvy partnership between buyer
and real estate agent will have a firm grasp of the market. In the GTA, JN
Asensio is a realty group who have their fingers on the pulse of the community.
They can help you start the process by finding an investment property to buy.
Recommendations are to find a 3 to
4-bedroom house that needs some tender loving care that was originally built between
1950 and 1990. You’ll also want to assess what the property would be worth if
all repairs were made and any dated décor was updated. This is your goal
selling price, or the After
Repair Value (ARV). Then create a budget within the difference between
selling prices and ARV to maximize your profit.
There is much more to flipping
homes but this is the basic principle. For this type of investment, as well as
commercial and residential, partnering with a great real estate agent or REALTOR®can prove to be very fruitful! Their experience and know-how can only lend to
the profitability of your investment property!