Buying your first investment property can often feel like a harrowing adventure. It’s a massive outlay of both your money and your time, and you’re not even going to live there? That said, there are many reasons everyone should at least consider owning an income property. Or two or three. For many people, that first investment is like eating the first potato chip. You can’t stop at just one! Once you get a taste of the excitement of real estate investing, you may find yourself hooked for life.
The Benefits of Owning Multiple Income Properties
The benefits of buying an income property are less tangible than obtaining a place of your own. You don’t get the instant gratification of moving in and throwing the party to end all parties to celebrate this once-in-a-lifetime milestone. What do you gain by investing in real estate? If all goes according to plan, here’s what you have to look forward to.
- The chance to build your equity and increase your purchasing power when your property rises in value. Owning multiple properties means your wealth can grow almost exponentially faster.
- A non-stop flow of passive income. And, of course, the more properties you own, the more income you generate.
- A backup plan for when you move or retire. You may not need to look any further than a house you already own when you’re ready to downsize.
- A valuable asset to leave to your loved ones. Real estate is one of the best ways to create generational wealth and provide financial security for your children and grandchildren.
The above are tangible perks of a successful real estate investor’s life. But there are other intangible benefits that are hard to quantify. The pride of ownership of your income properties differs from what you may feel about your own house. Your acquisition may not be your dream home, but it is going to be someone’s home. And in an increasingly crowded rental market with dwindling vacancies, you are providing a badly needed service.
Investing doesn’t have to be intimidating when you have access to the right information. The following posts will show you the ropes:
- How Selling an Investment Property in Peterborough is Different
- New Landlord Checklist
- The Beginner’s Guide to Investing in Real Estate
How Your First Investment Funds the Next
The thought of buying one investment property can fill you with fear and dread as you imagine every possible worst-case scenario. To buy a second or even a third one? That must take nerves of steel, right? But, like many things in life, the first step is the hardest.
Once you get your foot on the first rung of the property ladder, everything else falls into place. And your first property can help you finance your next investment, and then the next.
In fact, many successful investors started out nervous and unsure but determined to forge ahead nonetheless. Here’s how a single property can propel you on your journey to the investor’s life.
- In 2017, the average price of a house in Peterborough was $363,310. In 2023, average values have risen to $683,782, almost doubling in value. If you bought then, your equity would have grown by $320,472 ($683,782 – $363,310).
- You can now borrow against that equity to fund the purchase of your next investment. When that property inevitably rises, you can add to your portfolio again.
What happens if real estate values fall? Buying a property only to see values drop is one of the biggest fears about entering the market. However, fluctuations are a fact of life, and decreases are usually temporary. With the growing population, the demand for housing will be unprecedented over the next few years. That means the time to start investing is now!
The BRRRR Method Explained
Another way to explain how one investment empowers the next is with the BRRRR method. Here’s how it works:
- B – Buy: Find an undervalued property that you can fix up within a reasonable budget. This may take some searching in a tight market, but your effort and research will pay off.
- R – Renovate: Make any essential repairs to make the property attractive to prospective tenants. You don’t have to make a significant overhaul like you would of your own home. However, the unit must meet all safety standards and have a comfortable, welcoming appearance.
- R – Rent: The rental income should cover most or all of your carrying costs. This allows you to hold the property for the long term so you can see the most equity gains.
- R – Refinance: Once the house has grown in value, borrow against the equity to cover the down payment of a new property.
- R – Repeat: Use these exact steps, again and again, to add as many properties to your portfolio as you wish.
The formula above is how many real estate investors become financially secure or even wealthy. You decide what level you want to reach and then take the first step. Surrounding yourself with knowledgeable experts can help you avoid common pitfalls and enjoy the highest chances of success.
The Risks and Responsibilities of Owning Multiple Properties
Investing in real estate is and has always been one of the best ways to grow your wealth. Still, everything has risks, and very few things ever go exactly as planned.
The trick is not to avoid the risk, however. Instead, learn to manage it. In other words, prepare for the worst, and hope for the best! The first step is to know what can go wrong and have a plan for overcoming those obstacles.
Problem:
Property values can fall once you’ve made your purchase. When this happens, equity works against you. The more properties you own, the more leverage you lose.
The solution:
Always have an emergency fund to carry you through the lean times. And remember that these losses are temporary. Real estate values have gone nowhere but up over the long term.
Problem:
It may take longer to find the right tenant than you initially hoped. During that time, you’ll have to cover the carrying costs on your own.
The solution:
Choose your income property carefully and make sure you have enough set aside to hold you over for a few months.
Problem:
You might invest in a property that doesn’t produce positive cash flow. If that happens, you may need deep pockets to be able to hold on to your investment long enough to see the equity gains.
The solution:
Work with a Realtor® who has investment expertise that can help you find and vet properties before making your purchase.
Problem:
A bad tenant can make your venture “challenging” to say the least. This is often a bigger deterrent even than the fear your property will lose value.
The solution:
Vet potential tenants carefully, and don’t judge by appearances alone. The tattooed young couple may be an absolute dream. And someone who seems perfect initially can turn out to be a nightmare. Conduct background checks, ask for references, and interview prospective tenants to ensure you find the right fit.
Problem:
Managing and maintaining multiple properties can be exhausting, even if all goes well.
The solution:
Work with a property management company that can arrange for repairs, resolve disputes, and vet tenants on your behalf.
Want to know more about why people are flocking to Peterborough and the Kawarthas? The following will give you some insight?
- Why Peterborough is Perfect for Families
- Top Activities for Kids in Peterborough
- 5 Things You’ll Never Miss When Relocating to Peterborough from the GTA
Why Invest in Peterborough?
Peterborough is quickly becoming one of the hottest destinations for those leaving the GTA. It has everything going for it; a high quality of life that is also affordable, great shopping opportunities, exciting festivals, and a fantastic dining scene. Plus, highway access and public transportation make it a highly convenient location for those who wish to visit the GTA frequently.
Peterborough is hard to beat from an investment standpoint. The number of relocators means that the rental market is booming. Currently, we have a 1.1% vacancy rate, which is the lowest in any city with a population of over 10,000 people.
Buying an income property in Peterborough means you can be nearly certain of finding the right tenant to help make your investment a long-term success.
Do you have any questions about investing in Peterborough real estate? We work with investors at all levels, from beginners to seasoned experts, and are happy to help you reach the next level. Contact us today by emailing team@jeffandkatie.ca or calling 705-243-9797 for more information.
Let Us Guide Your Journey
Curious about your real estate options? Relocating to the Peterborough area? Our experts are ready to help.
