As the global economy continues to fluctuate, many people feel uncertain and even anxious about the future. As always, everyone handles the new reality a little differently. Some are being extra cautious, shying away from any venture with a hint of risk. For others, the saying “nothing ventured, nothing gained” isn’t just a motto. It’s a way of life, and they will seek out opportunities wherever they can find them.
However, if you’re looking for a solid investment with the least amount of risk possible, real estate remains one of your best options. Why? Even when the market changes and houses drop in value, the setback is usually short-lived. In 2023, news of increased immigration targets almost certainly means the demand for housing will spike again. When that happens, prices will likely rebound, and competition could return to the market. In many ways, now is an excellent time to begin searching for your next opportunity. The question is, how do you spot the perfect real estate investment? The following guidelines will help you move forward with confidence while avoiding common pitfalls along the way.
Know Your Resources and Your Risk Tolerance
Success favours those who create a plan based on facts and data rather than jumping in unprepared. For the best results, you should brace yourself for the fact that nothing is guaranteed. A property you invest in today might lose money over the next few months. It has happened to everyone, which is why the most successful investors plan for the long term. Setting aside a financial cushion to get through market fluctuations will make your investments much less stressful.
Your first step is to analyze your resources and know your risk tolerance. To see how much you are willing and able to endure, ask yourself, “what is the absolute worst that can go wrong?” Here are a few scenarios that can and do happen.
- Your property could lose value after you purchase it, meaning your equity takes a hit until prices increase again.
- If your streak of bad luck continues, it might take a long time to find a suitable tenant to rent your new home. This means you’d have to carry the cost of the property even though it is not yet generating income.
- You might find a bad tenant who doesn’t pay rent on time or take care of your property.
Most of these setbacks can be remedied by careful planning, having an emergency fund, and keeping your eye on your long-term investment goals. Once you know how much you can safely invest, you can create a clearer picture of what your perfect investment opportunity looks like.
Is investing in Peterborough the right decision for you? The posts below will give you something to ponder:
- How Selling an Investment Property in Peterborough is Different
- Why Peterborough Investors Don’t Need To Worry Now
- Stocks Vs Real Estate: What’s Better In A Shifting Market?
What Is Your Starting Point?
Investors come from all walks of life. Some are beginners who are currently renting and have yet to buy their first property. Others are well-seasoned and have purchased and sold multiple homes. A beginner will likely look at different opportunities than a seasoned investor. For example, you may be happy to get your foot in the door with your first condo. This step allows you to build your equity instead of paying monthly rent. Once you build some financial stability, you can search the market for other viable properties.
If you’re a more ambitious first-time buyer or have more resources to get started, you may look at a house that has a basement apartment or a secondary suite. Not only will you start building equity as that property value grows, but your monthly rental income will help cover your carrying costs.
Do you already own a house? The accumulated equity can open more doors to you than you realize. If you want to stay on the safe side, you can start by adding a rental suite to your existing home. If you have access to financing, you can purchase a new property altogether.
A buyer’s market may be the best scenario for investors, but you can often find outstanding opportunities anytime if you keep your eyes open. And keep in mind that the sooner you begin adding properties to your portfolio, the sooner you will benefit from increased equity and passive income.
Look for Undervalued Properties
Here are some tips to help you discover and secure the best possible opportunity the current market offers.
- Look for cosmetically imperfect properties that are structurally sound. Other potential buyers may be turned off because of some peeling paint, an unkempt lawn, or old grungy lighting fixtures. In that case, the seller may be willing to negotiate a low enough price that you can recoup your monthly costs through the rental income. A few minor updates later, and the home is ready to show off to prospective tenants!
- Research how much similar properties are renting for. A smaller unit in a more desirable area may seem overpriced until you run the numbers.
- Look at the upcoming changes to demographics that are likely to occur. For example, the new immigration targets mean certain areas will become more populated, and the demand for rental units will increase.
As always, a local real estate agent who works closely with investors will be your go-to resource for finding suitable properties and analyzing the data to see if the opportunity makes sense.
Are you new to real estate investing? Here are some resources to help you hit the ground running:
- New Landlord Checklist
- The Beginner’s Guide to Investing in Real Estate
- How To Be A Millennial Landlord
The Benefits of Investing in Peterborough
In Peterborough, there are areas where rental prices have doubled from five years ago, making the possibility of generating positive cash flow even more likely as housing prices drop. This means you can carry the property at a profit while setting money aside for repairs and emergencies and even having a little left over to enjoy. What if a property just breaks even? It is a fantastic opportunity because it allows you to hold the asset and take advantage of equity growth as values increase over time.
Ready to find your first investment property or add to your portfolio in Peterborough? We can help to determine what neighbourhoods and housing structures present the best opportunities. Reach out today at team@jeffandkatie.ca or call 705-243-9797 for more information.
