Looking to buy an investment property in Canada? Here are five tips to help you make the right choice.
Purchasing an investment property can be a great financial decision or a huge burden. It just depends on the way you go about it. We have put together a few tips to help you make the experience a good one.
5 Tips To Keep In Mind Before Buying An Investment Property In Canada
Understand your finances and sort them early
If, like most of us, you haven’t won the lottery, or have a treasure chest with wads of money hidden, you will most likely need to find financing options such as mortgages for your investment property. Understanding the limit of your finances, your debt to income ratio and the position of your credit score early can help you make the needed changes and be eligible for an investment property mortgage.
Investment properties with amenities in the neighbourhood tend to give the most returns. Ensuring your property is in a prime, or a well-developed neighbourhood could make a huge different on the final amount you get in returns. However, it is important to keep in mind that fixer uppers, especially for a first time investment property buyer, could be a bad idea.
Make sure you have the right margins
With an investment property, you are likely to make profits. But it is important to keep your margins in clear sight before buying the property to avoid any financial shocks.
You will need to understand your cash flow (Monthly rental income – expenses), cap rate (cash flow/ property value) x 100, cash on cash return (cash flow x cash investment) x 100.
Choose the right mortgage
Depending on the type of property you are investing in, your mortgage and mortgage terms may change. For example, if you are buying a 4-plex and living in one of the units, your down payment could be as low as 10%. On the other hand, if you are not living in it, your down payment will be higher. Making sure you understand your property, your options with mortgages and find the right interest rate for yourself is a crucial step in the investment process.
Consult an expert
When you are looking to make this level of an investment, it is always essential to consult experts. Mortgage brokers, especially, can help you navigate tough waters with ease. They are well aware of the various options you have in terms of mortgage plans, and they can connect you with a wide variety of lenders. This could give you a chance to get competitive interest rates as well.
Find the investment property mortgage you need with One Mortgage Group. Contact us now.