Is real estate a good investment?
Investing can feel like a scary road to embark on and even scarier when the return is uncertain. Despite how scary it may feel, investing in real estate is a long-term game that can offer big rewards. However, it is important to manage the risks that come with the investment. If you treat real estate investing as a business and enlist an expert on your side, there’s a good chance you will see the reward at the end of the tunnel.
Here are several things to consider when asking yourself, is real estate a good investment choice for you.
Can you manage the maintenance cost?
Owning a home comes with some expensive maintenance that can be unavoidable. It’s worth considering if this is something that you will be able to absorb should the situation arise. A good rule of thumb is to have an emergency fund of at least $1 per square foot of the house.
It’s also important to keep in mind exterior maintenance like cleaning the gutters, maintaining the driveway, shovelling snow in the winter and mowing the lawn in the summer. Please keep in mind that, while many of these jobs can be done by the homeowner, if the work is not done properly, it may result into costing more money in the long run.
Do you have what it takes to purchase a home when it comes to money?
The purchase of a home requires significant capital up front. You have the deposit to consider which typically is 5% of the purchase price, as well as the home inspection fee that can cost you anywhere from $300 to $1000. In addition, there are other fees to consider as well: the appraisal fee which ranges from $275 to $500, legal fees which cost about $900-$2000, land transfer tax which ranges from 0.5% to 2.5% of the property values, insurance costs, taxes and so much more. Making sure that you are clear on all the hidden costs of buying a home and that they fit within your budget is one of the first things to determine when considering purchasing an investment property.
Do you have the capacity to be a landlord or the capital to hire a property management team?
For some, being a landlord is definitely more trouble than it is worth. And depending on the tenants you get this can be especially true. The reality is, even with the best tenants there will inevitably be challenges that arise. Assessing whether or not this is something that you are able to manage is going to play a big role in the success of your investment.
Is the going rate for rent on comparable properties enough to cover your mortgage?
This is an important thing to consider when purchasing an investment property. Will the rent that you receive from the property put you in a cash flow positive position? Or will you break even and be in the negative?
Are you okay with managing the risks?
There are many risks to consider when considering real estate investing. This article outlines them well. While any investment comes with risks, it is important to be aware of and consider the common risks that come with real estate investing.
Are you ready to jump into the world of real estate investing?
We would love to connect with you.
Our team is focused on helping our clients build generational wealth.
Let us help you achieve that.