Investing in Toronto real estate can be a profitable venture if done properly. Here are five smart strategies to help you reach your financial goals.
Buying and Holding
The goal here is to purchase a rental property for as low as possible and hold onto it long-term. In this scenario, the tenants will gradually pay the mortgage off with the rent due. This is a popular strategy for Toronto area investors since it’s so straightforward and effective. As long as the income received covers the expenses and you have paid at least 20 per cent as a down payment it’s generally quite successful.
Flipping a property has also long been a popular strategy in Toronto. Purchasing a home under market value if possible and selling it quickly for a profit happens after renovating it or fixing it up. These types of properties aren’t always easy to find, but you can increase your profit margin if you can do as much of the repair and renovation work as possible yourself. Financing the property may be a little more difficult since you won’t be able to show any income from the home until you sell it. In some cases, you may need to deal with specialized lenders for financing help.
The hybrid is a strategy which combines the theories of buying and holding and flipping. It consists of purchasing a property which is in need of quite a bit of tender loving care or renovation. When it’s been renovated the owner holds onto it, rents it out and then sells it when the real estate market becomes favourable. Be sure to be realistic regarding the financing costs when you calculate the expected profits.
Renting to Own
It’s now quite popular for Toronto area residents to rent to own when it comes to their living arrangements. Investors purchase a home and then seek potential home buyers rather than renters. In general, these rent to own buyers are people who are aiming to own a home of their own but need more flexible terms. In this case, the owner negotiates a deal with the potential buyers to purchase the home by a specific date and at a specified price. In many cases, an “option fee” might be charged to make sure the property is secured. While the tenant lives in the home, they pay rent plus a specific amount which goes towards the tenant’s down payment. This provides the owner with cash flow and gives the tenants the breathing room to eventually become homeowners.
Many investors prefer to team up with somebody else who has the same goals when purchasing property rather than going solo. When entering into a partnership it’s very important to make sure every single detail of the venture is down in writing and copies are made. This document should outline everybody’s financial requirements as well as things such as renovations/repairs to the property, who covers the costs and how tenants are selected and when you intend to put the property up for sale.
These are some of the more popular ways for people to invest in Toronto real estate. For more information on these and other tips and strategies please feel free to speak with a trustworthy Realtor at lisainopoli.com.