4 things we learned from our investment journey

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Don’t wait to buy real estate, buy real estate and wait. – Will Rogers

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To me, the quote is inspirational.

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It kicked off conversations between Mo and I about wanting to purchase additional properties so we could rent them out. We pictured ourselves as landlords, you know, the nice ones who leave you a gift on move-in day and drop off cup-cakes from time to time (if Mo hasn’t eaten all of them).This was our opportunity to further explore our love and passion for real estate.

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Our journey started off like any other – all over the place. We got excited about looking at properties across the GTA and sometimes even pushed the limits to locations like Timmins. We were looking for “potential”, even if we ourselves didn’t know exactly what that meant.

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At a certain point we hit information overload.

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Buying a rental property isn’t like buying your typical home. You don’t just find it, buy it, move in and you’re done. There’s a number of considerations you need to factor in up-front when assessing a property (somethingI very quickly learned). For example:

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Where do I want to buy?

There’s a ton of information out there, and it’s important to try and become an “expert” in an area you’re looking to invest in. Things like the demographic that would typically rent your property, or proximity to grocery stores and transit – all important factors that will help determine what kind of return you could earn on your property. By looking “anywhere”, you’ll quickly learn like we did that it’s hard to determine the best place to invest until you truly know the area you’re investing in.  

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Do you have an emergency fund?  

Take my advice – don’t Google search “Rental Property HorrorStories”. It’ll deter you from the entire process. One of my biggest learnings from other people’s unfortunate situations was that it’s paramount to establish an emergency fund. That fund is designed specifically to handle unforeseen repairs as well as cover payments for times when the property may be vacant (due to listing or tenant transition). You’ll need to continue to replenish it as you use it, but having that safety net from the moment you purchase an additional property will give you peace of mind.  

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Once I find a property I like, how do I buy it?

Fortunately, banks will happily lend you money for a rental property as long as, simply put, you can afford it. Now it’s important to understand that the guidelines surrounding how you qualify for a rental property mortgage are slightly more stringent than if it were a home you were living in. Also worth noting that you will require at least 20% down on any property you purchase in addition to your primary residence. Working with a mortgage broker or bank will help you understand the specific details and guidelines under which you can obtain a mortgage for your rental property. 

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What could impact my approval? 

It’s EXTREMELY important that you talk to a mortgage professional before purchasing a rental property. As mentioned, since the guidelines are tighter, you want to ensure you’ve run through the numbers correctly before you submit an offer for a property. Simple things like a line of credit or auto loan can have a significant impact on your ability to qualify for an additional mortgage. Don’t buy a fancy new car until you chat with a professional about the impact if owning additional real estate is a long term plan for you.

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This wasn’t intended to be an essay, but I wanted to share my thoughts on our journey so far. I’ll continue to post things you need to think about or be aware of if any of you are pursuing a similar path.   

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As always, don’t hesitate to reach if you want to learn more about our experience or simply need some advice!

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