Important things to Consider Before Buying an Investment Property
Beginning investors always seem to want to know: ."How much cash flow will this property bring me?". In order to answer that question, there are several factors to take into consideration. Here are some questions you'll want to have answered before considering a property:
Are there employment opportunities in the area?
Statistics Canada (www.statcan.gc.ca) offers reliable and timely data on the latest trends in the real estate market. Also, keeping up with the news will help you hear if a large corporation may be moving into the area, with families soon to follow. Consider if the property is in a college town or near a military facility where there will always be a need for rental properties.
Where is the property located?
Walk Score is a big attraction to most renters. What is the proximity to schools, hospitals, local transportation, grocery stores, etc.? Look for properties that are in a central location so that the demand will be greater.
What are the average rental rates in the area?
Your monthly rent is your bread and butter. Find out what the average rental rates are in the area by visiting Statistics Canada (www.statcan.gc.ca) or the Canadian Rental Housing Index (www.rentalhousingindex.ca/).
Is the area safe?
Once again, Statistics Canada (www.statcan.gc.ca) is your go-to source for crime stats in the area. Or visit the local police department to get it right from the source. Remember, in this day and age, renters do their homework too. They will get the same info and make their decisions based on what they find out.
Are there any amenities nearby?
Find out what amenities are nearby like free public transportation, a community pool or center, a large shopping center, a dog park, etc. The demand for certain amenities will vary based on the area. Remember that families will want different amenities than young professionals.
What school district is the property in?
A key variable that will help define your renter pool will be the school district in which the property is located. Research the local schools. Find out their rankings compared to other provinces.
Are there any plans for future development in the area?
Sometimes a simple drive-by will show you a lot about the area. Are there quite a few empty homes, condos, or store fronts? Does it look like there is a large boom in new construction? Often a neighborhood in the beginning steps of gentrification could result in both a faster and higher appreciation for investment properties.
Is there a high number of properties on the market?
Keep an eye out for market trends in the last couple of years. Review vacancy rates for the area (your realtor will have access to this info). Make sure to determine if you could carry the mortgage for a period of time in case no one rents from you.
What is the property tax rates in the area?
Again consult Statistics Canada (www.statcan.gc.ca) to review the taxes and the current market value assessments for the property you are considering. If they seem fairly high, find out the reason before buying.
Is the property in a high insurance zone?
Of course, no one wants to invest in areas where they can't get insurance or the rate is too high. Your insurance agent will be able to tell you exactly where the property is zoned and your potential insurance rates.
Take your time and do your research and soon you'll find that perfect investment property that will bring you extra income and build your portfolio.