When it comes to investing in real estate, one of your first decisions should be to decide whether you are doing this as a short-term or long-term investment. Both can be profitable when done correctly, but the methodologies can be quite different. This blogpost will cover a couple of the more common real estate investment methods.
In short-term real estate investment, one common investment method is to purchase a property, renovate/improve it, and then sell (flip) it on the market. The goal is to sell it at a price that will cover your initial investment and renovation costs, and still net you a handy profit!
- Search for a property that presents a good investment opportunity. Important factors include:
- Sale price
- Location of the property and quality of its surroundings
- Extent of the improvements/renovations required to make the property appealing
- Check whether there is a lease on the land that is resulting in a lower-than-usual sale price.
The main point of this strategy is that you should aim to purchase ‘discount’ properties. That is, properties that are either in need of some renovations or have some other defects that negatively affect property values. You would then fix the property quickly and efficiently, and then sell the property at a higher price. Older properties will usually have more issues than new ones (and thus more areas of improvement), so you shouldn’t necessarily overlook old properties! If you’d like to read more on buying new or old properties, click here!
Points to consider when executing this strategy include whether you are able to identify the ‘correct’ properties, whether you’re able to efficiently carry out repair work, and whether you are able to obtain a good sale price afterwards.
Working with an experienced realtor will help you in your search of properties that truly present a good investment opportunity. After all, you don’t want to purchase a property, spend money fixing it, and end up being unable to sell at a good price (or worse, unable to find a buyer)!
In long-term real estate investment, one of the most common methods is to buy a property and rent it out for some time. If done right, you will have cashflow from rent, and in the future, you would be able to benefit from any gains in property value when you decide to sell the property.
- Scout out what property you would like to purchase, and where. Working with a local realtor will help you tremendously in determining whether your investment property is located in a good area. If it’s not in an appealing area, you may find yourself struggling to find a tenant at an adequate rent, which can result in vacancies and loss of rental income.
- Buy a property for investment (Either with your own means, or with financing from a lending institution.)
- Familiarize yourself with BC’s Residential Tenancy Act and rent out the property.
- Ideally, rent should cover the costs for:
- Mortgage payments + mortgage interest (if you are using one)
- Property home insurance costs
- Maintenance fees / other repair costs
- Property Taxes
- Utilities/services/etc. (depends on your rental agreement details)
- Rental management company fees (if you are using one)
- The goal is for the rent to cover all above costs, and still have some profit left.
- Over the years, your property’s value may increase by a substantial amount, allowing you to obtain a good return on your initial investment if/when you decide to sell it off.
Of course, there are many points to consider when executing this sort of strategy. To name a few examples: You have to consider whether you will be managing the property yourself or hiring a property management company. You need to be prepared for times when your rental income may not be able to cover your costs entirely (if you have vacancy losses, etc.). Your costs may change over time: rising property values may also lead to rising property taxes, for example.
In short, if you want to succeed in real estate investment, you should approach it as you should any other investment: with careful planning, calculations, and considerations. As the old adage goes, failing to plan is planning to fail.
Whether you are looking to invest short-term or long-term in Vancouver’s real estate market, working with an experienced and local realtor can help you enormously. My experience in both Vancouver’s real estate and construction industries have allowed me to help my clients with their real estate plans. I would be more than happy to discuss your real estate investment plans with you, too. Get in touch with me by email at email@example.com or by phone at 604-889-8609, and let’s begin planning for your success!