Investing

Start by finding an agent. Arrange a few consultations to make sure you are picking an agent that is the right fit. Make sure you select an agent who has a history with investment properties or working with investors, as there will be different considerations and knowledge required. In particular, the ability to analyze property returns. An agent with experience will be able to explain how to work this out.

Another early step we recommend is getting your finances in line and meeting with a mortgage agent to begin the process of securing a mortgage pre-approval. Doing so will allow you to feel confident in your budget, what your monthly payments would equate to and the current mortgage rates. Doing the work upfront will also allow time to address any potential surprises that may arise in qualifying such as a discrepancy in a credit report etc.

Start thinking about what you need in a property, all of the essential items and anything you might also want to see. These wants and needs will look a little different than a traditional buyer. Consider what your goals are with the property; how much time you have to commit to it; and the desired location. These questions will help you understand what is most important to criteria and your agent will help guide you through this whole process.

One of the most common mistakes first-time investors make is trying to find a unicorn with their first investment property. While it may be tempting to hold off until you find “the perfect deal”, many first time investors suffer from analysis paralysis and in turn never end up taking action. Everyone wants to make sure they’re making a smart decision and there’s a lot of money on the line but this can often lead to delays getting into the investment market and beginning to earn that income.

Another major pitfall for new investors is biting off more than you can chew. For example, purchasing a complete gut job that has an attractive price without the proper experience in renovations. When deciding your wants and needs, make sure to consider your personal circumstances, like the time you can commit to the property and your level of experience.

A major mistake is not doing a home inspection. It’s one of the most valuable tools that a buyer has in understanding the condition of a property and any potential issues that might arrive once you take ownership. We recommend always taking the time to get a home inspection. Some sellers will already have one available and if so, your agent will be able to direct you to it. If not, your agent will guide you through the process of obtaining your own home inspection.

The first thing to consider is whether or not it’s a viable option. Consider whether you have construction experience, time to invest in the project or contacts who can complete the renovations at a mutually agreeable cost and in the desired time frame. We recommend speaking to an accountant to discuss the tax implications and budget, as it’s pivotal to know your numbers.

Renovations aren’t like what we see on TV, as they will generally take longer than anticipated and regularly go over budget. The reality is that you often don’t know what you will find when you open up and expose things. Obviously, getting a home inspection report will help reduce the surprises but it’s important to understand that unexpected issues are likely to arise. We recommend budgeting for a little more than you anticipate spending to account for this.

The term ‘buyer beware’ means that you are responsible for doing your due diligence and the onus is on the buyer to investigate what repairs/upgrades may be needed. The seller makes no representations or warranties to the state of the house.

It may sound like a good deal at first but you should understand that you may be giving up rights to go back to the sellers for unforeseen damages and many times there are additional schedules attached to the agreement of purchase and sale that state that due to the nature of the sale the seller may not know the current issues of the house. These types of properties generally involve more risk so be sure to account for additional costs.

Many basement apartments in the city aren’t registered legal apartments. Unless it’s already registered, you will have to self-assess your risk tolerance. Your agent can provide more information about the criteria for a legal basement apartment and will provide guidance. We recommend looking out for the following:

• Whether there are multiple exits.
• Window sizes.
• Whether the drywall is fire-rated.
• Adequacy of smoke and c02 alarms
• Whether there is a sprinkler system.

Your agent may be able to request documentation supporting the legal status of the apartment from the sellers or assist with contacting the municipality to verify.