Q&A, then ROI

In life and in real estate investing, knowing what you want and why you want it is half the battle. Before you open your chequebook, search online or call a real estate agent, you must ask yourself what you want to accomplish, why you want to accomplish it and why you believe investing in real estate is the way to help you achieve it. These are tougher questions to answer than they might appear.

Do you want to build a portfolio so you can sell the properties and use the money to fund your retirement? Do you want to buy a property every time you have a child so that 18 years down the road, the monthly cash flow or income generated from the sale of the properties can contribute to the cost of their post-secondary education? Do you want to put your skills as a handyman (or woman) to work to fix and flip? Once you know your why, you’re halfway there.

What’s the best strategy for me? Once you’ve established why you want to invest and have confirmed that real estate is your vehicle of choice, you have to determine how much time and effort you want to expend. Would-be investors can have unrealistic expectations, so they choose labour-intensive projects when they’re really better suited for more passive investments.

I’ve known people who have made terrible mistakes thinking they wanted to fix and flip, but when they looked at how much available time they had, it was a nightmare. The many fix-and-flip shows on TV paint a rosecoloured picture of that aspect of investing, but investors should keep in mind that those shows are packaged as entertainment. Like most reality TV, these programs don’t necessarily traffic in reality.

I’ve known doctors and dentists who wanted to fix and flip, but in reality, they work too many hours to take on a project like that. They ended up losing money because they paid professionals to finish their projects. They also weren’t educated enough to know how much they should be paying to update their properties, so they ended up with granite countertops in rentals that didn’t warrant upgrading to that extent.

What don’t I know?
With the why, what and how decisions made, next you should set about educating yourself. Establish an informal group of people whose opinions you trust and who have had some success in real estate investing. Some of these people may be in your immediate sphere, while others might be experts you listen to on podcasts or follow on Twitter.

A Google search for “Canadian real estate investing podcasts 2018” returned more than 16 million results, so narrow your search by province, city, specialty, etc., to find the best fit for you. Look for people who have ‘been there, done that’ and are creative, with a finger on the pulse of investing trends that might be suited to your unique needs.

What are my options?
One such trend we’re seeing is a twist on subleasing. People who don’t want to go through the trouble of renting out a property but want to make sure the mortgage is covered might lease it to a family member, who then turns the property into a short-term executive or vacation rental. This arrangement works because the property isn’t necessarily something the investor wants to manage or maintain, and the lessee has the opportunity to make money above and beyond what he or she is paying in rent. Of course, everyone is fully disclosed, and this can only happen in communities where it is permitted by law.

Experts and investors are also buzzing about the trend of homes built from shipping containers. These homes handle climate challenges well and can be inexpensive to build compared to traditional construction. They are well suited for island living and hillsides, and they appeal to baby boomers and millennials looking for efficient, compact, environmentally friendly homes to rent.

Approaching real estate investing by first establishing your why, what and how, and then learning all you can, will help you to enter the market with your eyes open and achieve not only better financial returns, but also better emotional returns because your investments will be based on what makes sense for you.

Whether you’re purchasing for your portfolio or your lifestyle, EXIT Realty’s agents are here to help you find the right property. To find an EXIT Realty agent near you, visit exitrealty.com.

This article originally appeared in Canadian Real Estate Wealth magazine. For your special discounted magazine subscription, click here

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