Are You Ready to Purchase an Investment Property?
Alt = “Man holding clipboard while talking on the phone near a ‘home for sale’ sign.”
Purchasing real estate is a great way to boost an investor’s portfolio. Real estate provides long-term stability, significant returns, and additional income from rent. Many Canadian investors who buy properties intending to earn revenue are multiple-property owners. Recent statistics from the Canadian Housing Statistics Program (CHSP) reveal that multiple-property owners own 31 percent of residential properties in Ontario.
Although purchasing a property is a significant step many investors take, it’s essential to be ready before proceeding, especially if it’s your first investment property. Ask yourself the following questions to determine if you’re ready for this milestone.
Do I Qualify for an Investment Property Mortgage?
Your qualification for an investment property mortgage depends significantly on your affordability, credit report, and value of assets. The lender will evaluate your ability to meet your monthly expenses to accept your application. The first question you need to answer is how much mortgage can I get approved for before proceeding with your investment.
You need to have an extensive financial plan that proves you’re eligible for an investment property mortgage. You can provide:
- A good credit report.
- Proof of income.
- Proof of down payment.
- The ability to show emergency funds.
- Existing property details.
What Is the Purpose of this Investment?
Ask yourself your end goal related to the property purchase. You might be interested in boosting your portfolio, flipping the house for revenue, or renting it out for additional income. The purpose of your investment can help you determine if you’re ready to take the next step.
The investment strategy you choose will impact the type of properties you view. Setting clear goals will allow you to narrow down your search and select the property that best works for your requirements.
What Extra Expenses Are Tied to a Property Purchase?
There are several expenses tied to a property purchase that you need to be aware of before you think about investing. Typical expenses include home inspection, property appraisal, lawyer fees, insurance, and applicable taxes.
Depending on your purpose of investment, your expenses could be higher. If you’re looking to fix and flip, you will need to spend more money renovating the place to prepare it for resale.
Does This Investment Fit into My Long-Term Plans?
Ask yourself if you think this investment is the right fit for your financial future. If you have sufficient funds and a stable income, it could be an excellent investment, allowing you to maintain this property in the long term.
If your goal is to rent out the home, you should also ask yourself if you’re ready to be a landlord, as it comes with extensive responsibilities and requires sufficient knowledge and preparation. It would help if you had enough time to find qualified tenants and be ready to help them with any problems they encounter when they rent your space.
Purchasing an investment property can benefit you, depending on your end goal. If you’re looking to diversify your portfolio, a property can be a great addition. But it is necessary to ask yourself the questions mentioned above to determine if you’re ready to purchase an investment property.
Produced in association with Craig Lebrau