An investment, or a home?

The million dollar question these days seems to revolve around how to really take advantage of this buyer’s market.

The million dollar question these days seems to revolve around how to really take advantage of this buyer’s market. It seems many of us lucky Torontonians have finally embraced the idea that our real estate market remains a rather worthwhile investment and that, in many cases, stands as arguably the best place to entrust our hard earned dollars. Now we want to know how we can really milk this buyer’s market, which appears to promise some very lucrative real estate investment options.

Like all journeys not yet travelled, it makes good sense to take things one step at a time.

The starting step here means determining your down payment options. If you find that, for instance, you cannot comfortably invest more than about five per cent of the purchase price of the property then you’ve already focused your options tremendously, as the resale market shall now be your guiding light. There is of course a much more technical element of investments that involves an assessment of the projected return on your investment, but for our current purposes the next question you want to answer is, do you plan on living at the property, or is it solely for investment purposes.

The reason this question is important is because my experiences have taught me that the property that is the best investment will virtually never double as the property you’d choose to live in. When it comes to buying a property and renting it out, chances are your mantra follows something along the lines of the absolute cheapest box in the busiest rental area. If you’re looking to actually live in the dwelling, unless you have a certain affinity to the grungy, chances are you’re dancing to the tune of a different song.

If you’re planning on living in the place, congratulations, you need not worry about the investment side of the coin nearly as much because while you want to ensure you’re making a healthy purchase, you’re buying a home, not a stock. Do your homework and work with a trustworthy professional to secure a solid property but always remember that it’s your home first, and an investment second.

For those of us primarily looking at the real estate as an investment, your down payment will determine to a large extent, your options and therefore your potential returns. The most affordable yet worthwhile residential real-estate investment remains the small- to medium-sized single bedroom condo near the downtown core, in a building where you can rent to both high-end medical students as well as professionals, yet not over-run with availability. Not simply a downtown condo with a good rental history. See the difference? Quality of tenant is just as important, if not more so, than “rentability.” Especially when the potential to have it all is quite realistic. You just have to know what you’re looking for.

Remember the goal is to replace the dollars leaving your pocket on mortgage payments with the rent payment cheques coming in. Even in today’s market your main source of profit will come from appreciation — the eventual sale of your condo. If you can turn a positive cash flow on a monthly basis — bonus.

Now as I’d mentioned there is a much more technical level to the real-estate investment business, which I would love to discuss now but am restricted by the confines of this space. So I will be sure to carry on next week. In the meantime, remember, you can’t secure anything, including a successful real-estate investment, if you’re not sure what it is you’re really looking for.

– Amit is a Realtor/Developer with Re/Max. amitp@rogers.com

 
 
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