3 Steps to Picking the Right Investment Property

The last few months have literally been a whirlwind.  We have been renovating our new personal home and prepping and selling our current home.  Not to mention that we have 2 large renovations on the go, and two more starting in the next few weeks.  With all that – we still have our day to day business to run, clients to wow and properties to manage.

Oh and did I mention a baby!  A full time job on its own.

We recently bought this awesome purple mattress.  I think it is the mattress (I convinced her to buy it!), but my wife thinks it is pure and utter exhaustion.  When we hit the sack at night, we are literally passed out in 5 minutes and don’t wake up until the morning.

Our life is busy, it is hectic – absolutely crazy some people may think, but it is so rewarding.  Doing what you love and working because you want to, not because you have to is a pretty awesome feeling.

And the key ‘why’ for us, is financial freedom.  Waking up each morning with peace of mind, even amongst the chaos, sounds a bit strange but is precisely how I feel.

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So now onto this week’s blog topic – the steps to picking the right investment property.

Analysis paralysis is common – or simply not knowing where to start.  I think the key to our success, and others whom have made it big in this industry is simply pulling the trigger.

But obviously not without some thorough soul searching, research and of course, analysis.

So here are the key questions that you should be asking yourself if you are looking to start investing, or figuring out what your next move should be:

Why you want to invest?

The big why is the most important of them all.  What drives you – this is what will propel you forward when the going gets tough.  I’m sure you have one big reason, if not many.

Creating financial freedom for yourself, having a plan for early retirement, helping your kids get through university – there are so many big ones.

But then there are small ones too.

Taking that dream vacation, sending your kid to private school, helping an aging family member, contributing to a charity that means so much to you – things that our 9-5 salaries often don’t give us the luxury to afford.

Your why is what will ultimately govern your how.  It isn’t about the money – but the money is the means to an ends.

What is going to fit your life style?

What does your day to day look like.  Do you have 4 children and a 50 hour work week?  Or are you single and work flex hours at your day job.

These are important questions when figuring out what strategy and style of investment will work best for you.

People are often overzealous and very ambitious at the start.  I know I’ve said it so many times – real estate investing is simple but not easy.

When we first started out – my wife and I were in our twenties.  We didn’t own a personal home, and had no kids.  We were lucky that we had 9-5 jobs that allowed us to have our evenings and weekends free.  We dedicated that time to education and implementation.  We started buying properties all over southern Ontario and we would drive all weekend scoping out properties and managing the renovations.

Even then it wasn’t easy.  We still had day jobs – and would get calls at work all the time (this didn’t bode well).  We were having a hard time coping with our social and family life because we simply did not have the time or energy to dedicate to these things.

The reason I say this is that you should really do some soul searching before deciding on how you will invest.  The key is ‘how’ and ‘where’ to invest- irrespective of your situation, it can be done.

Maybe taking on a large renovation isn’t right for you if you have a demanding career and busy family life.  Perhaps a single family rental where the management can be outsourced would be much more suited.

Some strategies to consider if you are a busy working professional:

  • buy and hold (good homes, good areas, generally hassle free)
  • rent to own
  • small cosmetic renovations

And what if you have more time and like to get your hands dirty?

  • larger cosmetic renovations
  • basement apartment additions
  • flipping

Focus on the fundamentals

Funny enough this is the last step.  But I work with clients all the time who get really wrapped up with this.

Which area will I buy in, is the condition of the house good enough, how will I find a tenant, what about the cash flow…….

These are all important questions but really more logistical in nature.  Finding a good property in a good area is really just the last step in this process. Once you have nailed down your why – we can focus on the how.

Getting your financing in order, figuring out where you will get the money for the next deal, finding the next deal.

This can all be done if your why is big enough.

Believe me.  I have seen people go from 0-10 properties in a matter of a few short years.  They make it happen.  They work with good mortgage brokers and realtors, this is the step where you can start to leverage the expertise of others to make things happen.

But some important things to consider are:

  1. How much money do you have – if you don’t have money, what are ways that you can raise capital (friends, family, HELOC etc.)
  2. What about financing – how is your credit, speak with a mortgage broker as this will be a key factor in deciding your maximum price point for purchase.
  3. What areas are you most comfortable investing in – based on economic fundamentals and comfort (familiarity, proximity to your home, available contractors and property managers etc).

So ask yourself these questions and hopefully it will help whether you are buying your first or deciding to buy your next investment property.

So until next time, happy Canadian Real Estate Investing.

Jose Jafferji, REIA

Your Real Estate Investment Advisor, Coach & Realtor
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