Real estate, the gold mine that you may have yet to touch.
Sure, you may already own your own home, but is that enough?
According to Rentals.ca, the average rent in Canada for condominium apartments is $2,234 while for a typical apartment, it’s $1,468. A single family property rents for $2,566 and a townhouse $2,042.
That’s the national average, discounting the location. Now imagine a monopoly board and owning various real estate properties on every corner, can you count how much profit you can make from rentals?
In this article, we’ll give you a compelling argument why investing in real estate is a smart choice.
Additional Income Sources
Passive income is the key word here. Let your money work for you and not the other way around!
If you’re new to this kind of business, you start by using a part of your home as your own and another part as a rental. Some start-up families rent out their basements; whether it be as an Airbnb or a lease, you have options. The ideal scenario would be to have the rental payment cover the cost of your monthly mortgage.
If you’re determined to make this into your side business, you can opt to purchase other properties and divide the space into usable units for rent!
Here are some key factors that you need to ponder on before diving in. These items will help determine the cost that you can set for your rental:
- square footage
- number of bedrooms or bathrooms
- building type (e.g., wood or concrete)
- available parking
- property type (e.g., single-family residence, condo, townhome, duplex, triplex or fourplex)
The Influx of New Blood
With Canada welcoming immigrants from all over the world, it has become a melting pot for various workers to live in. At the end of 2019 alone, as many as 313,580 people migrated to Canada.
A rental can be the most practical choice for new immigrants due to a lack of credit and employment.
In addition, every year there are thousands of fresh blood from universities that graduate and are eager to step out into the real world. Their first choice for an abode is usually renting a condo or apartment (sometimes with a roommate) to save up for other expenses.
According to Payscale.com, the average salary for a Bachelor’s degree is $59,000 annually or around $4,916 a month which is just enough for a rental, plus some necessities and savings.
Long Term Investment
As stated earlier, the great thing about owning real estate is that it becomes an asset. It’s a safety net in the event you need a little extra cash in the future.
As an added bonus, if the community where your rental is located starts to flourish with new developments, its value will increase. And when the value increases, you can also increase your monthly rate. (Learn more when you read: 6 Reasons Why Real Estate is a Smart Investment)
There’s also the possibility of adding more to what you already have. For example, if you have an unused space next to it, you can add more rooms or spaces that can increase your passive income. That’s the great thing about owning your own real estate, the sky’s the limit!
You can also buy properties and sell them in the future. Real estate value usually increases with time.
Some also buy lots and build houses, then sell them afterward, with huge profits. This is what you call a real estate development.
There are more than one way you can build wealth with real estate. The decision is yours.
Get a Mortgage for Your Investment
There are various options in obtaining a mortgage for an investment property. They’re:
- Residential: 1-4 units
- Commercial: 5 or more units
- Owner-occupied or not
These factors matter because it will dictate how much down payment is required. Owner-occupied properties need only around 5-10% down payment while non-owner occupied is at 20%.
With everything that’s going on in the world, one of the best ways to plan for your future is by growing your assets.
Owning an investment property is different from buying one for your personal use. However, the best way to go about it and get started is by seeking guidance from a professional mortgage broker.