Real Estate
Investment - Still a Great Option for the Long Term Investor
by:
Matthew Honsberger
Investing in Real Estate is a great Addition to
any portfolio, but what is the best way to do it? There are a number of
different options, and we will go through some of them here.
The first one, and the one that seems to get the most attention these days is
the "Flip". With the emergence of shows like "The Big Flip", and "Flip This
House", this Buy, Renovate and Resell strategy is the 'sexy' option for most
real estate investors right now. However, there are a few things to consider
before you go about this. The first thing to think about, of course, is where
are you going to find the property that is priced well for the flip. There are a
few options for investors - the first of which is to contact a good Real Estate
Agent and have them scan all listings for you for any that are undervalued,
priced as is, owned by the bank or foreclosure company, or any other good
opportunities that might be on the market. Your Real Estate Agent is your best
friend in this respect, as they will be very motivated to find you the best
property, and will be very vigilant, if for no other reason than they know you
will be reselling the property at some point pretty soon! When looking for
Properties to Flip in your area, remember that the same rules apply as to your
own home - the first three things you should look for is Location, Location,
Location! Properties that are in Downtown Areas are often the easiest to resell,
however, they are often more expensive than more suburban properties, so that
will eat into profit margins. Look for houses on popular streets, in good
neighbourhoods. If you are buying into a worse neighbourhood, make sure you are
factoring that into your price of purchase, and projected resale. The other Key
factor to the Flip, is that you must ensure that you don't price yourself out of
the neighbourhood. For Example, no matter how nice you make your small bungalow
in an area of starter homes, Don't expect to resell it for 50% more than
anything else in the area! Ensure that your renovations don't bring the price
too high. Finally, Understand that the higher price bracket you try to flip, the
longer it is going to take to resell, and the higher your materials costs will
be. You need to consider all of this and much more before considering the flip.
The other main strategy that you can use to add to your investment portfolio in
the real estate world is the rental property. Rental Properties offer two
different qualities to your portfolio - income and capital gain. Your rental
property can offer you a monthly income over and above your monthly outlay of
expenses (mortgage, utilities and taxes). Even if your rental property doesn't
offer you a huge (or any) monthly income, remember, you are also earning a
capital gain on the property, as it is very likely to increase in value... just
like your personal home is. All of this should be taken into consideration when
deciding on a property. However, with Rental property, the most important
consideration is always the Tenants that you have. A great looking, well
maintained and located property can still be a nightmare if you get a bad set of
tenants in their. It is important to do stringent interviews, check references
and draft a strong lease agreement. You should also familiarize yourself with
the Nova Scotia Tenancy Act. Finally, you need to decide what kind of rental
property you are going to run. Do you want to rent to students? Young
Professionals? High or Low Income? Students offer payment by room, which is
often higher than you could command for entire flats, but you have to consider
that they will likely not care for the building very well, and might not have
the rent each month. Additionally, you have the concern of them bailing out on
you once school ends for the year. Young Professionals will often be very easy
to deal with, will pay their rent on time, but will also be very astute about
how much they will pay, and are likely to be there for only a short period of
time. Your Rental portfolio must always account for at least a 5% vacancy rate
(in the good times), and must still generate money for you with that in the
equation.
Like I say, in both of these cases, your real estate agent can be your best
friend, and you should seek out one that you feel can be an informative and
trusted advisor. They will work in conjuction with your financial planner as
well, to determine what the best course of action for you is. As always, you
should feel comfortable with whatever investment you make!
About The
Author
Matt Honsberger is a Licensed Real Estate
Agent in the heart of maritime Canada - Halifax, Nova Scotia, and the
designer of
http://www.homesinhrm.com.
