How do you know if you’re making a good investment? While there’s risk every time you look to invest, there are certainly ways to weed out the bad opportunities from the good, and the exceptional from the average.
Learn how to determine a good investment property, and how to make the right investment for your needs, with these 5 important considerations…
1. In-the-Area Amenities
Like so much in real estate, investing is all about location. When it comes to knowing the who, what, where, why, and how to determine a good investment property, the area you choose to invest in plays a pivotal role.
Is it close to schools, universities, attractions, or businesses? This will not only affect just how many people are interested in your eventual investment, but the kinds of people you’ll attract (which will also determine maintenance, turnover, cash flow, and many other factors).
2. Developed or Developing?
The “character” of the area you choose will go a long way in determining the quality of your investment. Whether you invest in a “hot” neighbourhood or somewhere that is projected to grow in the coming years will often determine how quickly your investment pays off (and how attractive it is in the first place).
Whether you’re considering the established development of condos along Toronto’s waterfront, the Niagara region of King West that’s filled to the brim with new projects, or the relative anonymity (and potential) of the Junction Triangle – you need to know the right choice for you.
Ready to brush up on your local knowledge? Our neighbourhood guides of Toronto’s best areas are a great start.
3. Knowing Your Timeline
One of the most important considerations you need to make has less to do with the property itself, and more to do with you. Your timeline is going to play such an important role in how you’ll invest.
Do you have time to spare to search, potentially renovate, and resell a property? Are you in a rush to recoup your investment? Your answers will change where you invest, what you invest in, and when you decide to invest. You need to have time (and patience) when you’re learning how to determine a good investment property that works for your timeline – especially if it’s your first investment.
4. Planning for Renovations
This consideration goes hand in hand with your timeline. When you first lay eyes on a potential investment, try not to think too much about how it might look when it’s finished, but how much work it will take to get it to that point.
Low-cost renovations (like painting, small repairs, and landscaping) can either be done yourself, or can cost anywhere in the neighbourhood of $25,000 to $45,000. Larger repairs can run up to and beyond $75,000 – these would be issues with foundation, sewer lines, or even problems with Kitec plumbing.
Major renovations cause major setbacks and stumbling blocks, and can turn a potential goldmine into a money pit – and fast. You need to know what needs to be fixed before you can even consider investing.
5. Budgeting to Invest
Your investment property can only go as far as your budget allows. How much you have in the bank will influence how many improvements you can afford and even how much you can collect monthly.
Recouping your investment starts with how much you can charge for rent. While properties in high-end areas (such as Midtown Toronto) have higher rental rates and growth, it means the properties themselves are often just as expensive. On the other hand, areas like Upper and Eastern Leslieville can yield lower rents with less-expensive properties.
There are also considerations involving average rent per area, taxes, and miscellaneous costs that tend to add up.
If you want to figure out how to determine a good investment property, you need to work with the experts that know the market. We’ll help you when it comes time to buy, and can guide you into the right decision for your specific needs. No second guessing, no self-doubt – reach out today and let’s get started.