How to Invest in Real Estate
So you’ve read Why You Should Invest in Real Estate, and the Investment Opportunities in current in Calgary and you’ve decided to go for it. Now what? What are the actual steps you need to take to start your successful investment journey? As a Property Management Company with over 40 years of experience, we’ve broken it down for you in 4 easy steps.
1.Refinance
The first step is to refinance your existing property. Speak with your mortgage broker about using the equity you have built up in your current property to use for the down payment on your next property. Equity = Money
2. Purchase an Investment Property
Use the money you’ve got from refinancing the equity on your existing property for the down payment on another property. Because you only pay cash for 20% of the property’s price and borrow the other 80% your Return on Investment is increased. This is called “Leverage”.
3. Rent Your Property
Time to rent your property! You can either be a DIY landlord (check out our library of eBooks for DIY landlords), or hire a Property Management company to manage your property on your behalf. The rental income should cover your mortgage, taxes and insurance on your property. When purchasing a Rental Property it’s important to consider hiring a Realtor with experience in Investment Properties. They should be able to provide you with a Rental Evaluation and Cash Flow Analysis prior to purchasing the property, to ensure it will cover all of your landlord expenses.
4. Repeat as Needed!
Over the years, you can continue building your Investment portfolio using the equity you’ve built up in your other rental properties. Once your portfolio reaches a certain point, you may want to consider hiring a Property Management Company to oversee the day to day operations of your rental property.
Let’s look at an example of an investment property:
$300,000 purchase with 20% down-payment = $60,000
Let’s say the property increased in value by 3%: 0.03 x $300,000 = $9,000
$9,000/$60,000 = 15% ROI
BONUS MONEY! Your tenant is paying down your mortgage, increasing the equity in your property.
Say your tenants pay $5,000/year. $9,000 + $5,000 = $14,000
$14,000/$60,000 = 23% ROI
Round 2 BONUS MONEY
Initially your property will be cash-flow neutral- just enough to cover expenses. But… rent increases an average of 7% per year, That’s triple the rate of inflation! So your property will be cash flow positive after just a few years.
Take the Next Steps to Build Your Investment Portfolio
Consultation
Meet with one of our agents to discuss if real estate investing is right for you. At this meeting, they will give you up to date information on the Calgary real estate and rental market, help you plan a budget and go over your options.
2. Find the Right Property
Using the information you provided during the consultation, our agents will find up to 10 properties that match your wants and needs. After visiting each property, they will show you their Top 3 along with rental evaluations and cash flow predictions.
3. Rent it!
Once you’ve bought your investment property, it’s time to find the perfect tenants. Power Properties’ full-service property management is designed to make investing in Calgary Real Estate an easy and stress-free experience.