The desire to make a profit is the main motivating factor for many a real estate investor. Indeed, real estate is generally considered a sound investment whether it be an income property, an industrial building, or a commercial plot.
But what does the beginner investor need to know before taking the plunge?
Your Budget
How much of your current income can you allocate to your investment? How much can you borrow, either from traditional lenders (banks) or nontraditional ones (an investment club, personal loans, etc.)? This information is critical in determining the type of property you can acquire, saving you hours of needless searching.
The Type of Property
There exist several options when it comes to real estate: a rental cottage, a multi-apartment building, a commercial property, a plot of land, and so many more for you to consider. What type of property do you believe is most suited to your situation? Do you feel like managing many tenants at once, for example? Your choice should equally take into account whether you would prefer being an active investor or not (see the following section).
Passive or Active Investing
How much time can you devote to your project? A rental property or any other residential building will require regular maintenance. This demands time, money and a certain skill set, unless you entrust management to an external company, which entails additional costs. Buying a plot of land will be less of a commitment than an income property in which several tenants live.
The other option worth considering is a passive real estate investment in the form of a real estate investment product (there are many kinds to choose from). You could also become a private investor in another person’s real estate venture. In this case, make sure you understand the risks, your level of involvement, and the expected returns.
Profitability Outlook
Do you want to generate a profit rapidly or, on the contrary, use this investment to fund a long-term goal, such as your retirement? The answer will help determine the type of property you should invest in. To help you think through your options, don’t hesitate to contact a real estate expert or a banker with knowledge in this field.
Real Estate Flipping
The new rules enacted to limit flipping haven’t yet spelt the end of this activity. It remains a popular form of real estate investment. The advantage is the quick return this transaction offers. Nevertheless, the whole process must be completed within a very tight timeframe, from the purchase to the renovation and finally the resale.
Short-Term Rental (A Few Ideas)
Once again, the new certification rules for short-term rentals don’t seem to have slowed down this practice. This form of investment’s advantage is that it provides an appealingly fast influx of cash.
Did you know that you don’t have to own a property to undertake short-term renting legally? If you’re a tenant and you have obtained your landlord’s authorization, you can rent out your unit for short periods even if you don’t own the building. You can likewise rent out a room and use of the bathroom inside your home, whether you are present or not, including or excluding access to the common areas.
Moreover, you can rent out your home on a short-term basis during your absence, while you’re on holiday, for example. Or even by renting a hotel room yourself for a lower rate than you’re renting your dwelling. This is a particularly effective way of generating a quick income if you own a large house. However, short-term rentals are subject to strict regulations, and failure to comply can result in hefty fines. Please refer to the Corporation de l’industrie touristique du Québec to learn all your obligations before going ahead.
In short, start by carefully thinking about your available budget and if you want to see a long-, medium- or short-term return on your investment. Then choose an option that corresponds to the amount of time and discretionary funds you have to make your real estate investment project a success. Good luck!