The changing real estate market has many would-be investors feeling a little nervous. This is normal as news headlines talk incessantly about a possible economic slowdown. However, savvy investors don’t rely on headlines, and they rarely follow the crowd. Instead, they follow the data and often do the opposite of what everyone else is doing.
The smartest investors are not reckless, but they are willing to take calculated risks.
Fortunately, many tools are available to help you, and you don’t need a lot of experience to succeed. What you do need is a plan. Here are some tips to help you get started.
Understanding How Financing Works
The upfront cost of investing in real estate is a deterrent for many people. That said, buying property can be one of the most stable and profitable investments you can ever make. Like anything, the sooner you break into the market, the sooner you can begin building your equity as property values rise.
Understanding how to finance your purchase is critical to your success.
Before looking at properties, we suggest visiting a trusted mortgage professional to review your options and help you obtain a pre-approval.
Do you want more information on how to invest during a changing market? Here are some additional resources to help you:
- Is the Mississauga Real Estate Market Still Safe for Investors?
- What is an Assignment Sale?
- Why Trust a Mississauga Real Estate Team During a Shifting Market?
Take Stock of Your Current Resources
Here are three significant expenses to keep in mind when looking at investment possibilities:
- Your deposit and down payment. For non-primary residences, you must have 20% ready for your down payment. When a seller accepts your offer, you immediately pay a deposit with 5% of the purchase price a typical amount, and the remainder due when the property closes.
- Closing costs. Once the sale is complete, your closing costs can add 3 to 5% to your total selling price. These include legal and administrative fees, land transfer taxes, title insurance, property appraisal fee from the lender and home inspection cost should you decide to have one. Note: When buying a house in Toronto, expect your land transfer taxes to be higher because there is both a municipal and a provincial tax.
- Your monthly carrying costs. Every month, you will have to make your mortgage payments, insurance, property taxes and cover the cost of maintaining the property. You’ll also want to have some savings available in case it takes longer than you realize to find the right tenant for your property.
Real Estate is a Long-Term Investment
It can be challenging to earn short-term profits when investing in real estate. The ability to collect enough rent to leave you with a profit every month is the best-case scenario.
Other times, your monthly income will just cover the mortgage. You won’t see an immediate payoff, but you’ll grow your net worth as your property rises in value.
In the worst-case scenario, you may have to take a loss for the short term.
The BRRRR Investment Method
BRRRR is an investment acronym that stands for “buy, rehab, rent, refinance, repeat.” It’s similar to flipping houses in that you’re looking for properties that need attention.
However, unlike flipping a property, you’re not going to sell it for a fast profit. Instead, you’ll keep it as a long-term investment and rent it out to cover the mortgage payments. Instead of selling, you’ll cash out by refinancing so that you can purchase your next property.
Buy: The key to making it work is finding an undervalued property where you can fix it up under budget.
Rehab: You increase the resale value and appeal to potential tenants by making significant repairs and upgrades to the home. When rehabbing a property, you must make your calculations carefully to ensure your investment is profitable and that you don’t get in over your head financially.
Rent: The monthly rent payments should cover all or most of your monthly expenses. You’ll want to vet your tenants carefully to ensure a positive, long-term relationship.
Refinance: Instead of selling the property like a house flipper, you cash out by refinancing.
Repeat: Once you’ve successfully refinanced your purchase, you repeat the whole process from the beginning.
The BRRR method does involve some risk. However, it can be an extremely lucrative long-term investment with the proper guidance. As always, you should consult a real estate professional with a successful track record with investors.
How do you know if your real estate agent is up to the task? Find out more right here.
Where Should You Invest?
Toronto attracts many investors because there is a giant pool of potential tenants. High property prices mean more people are looking to rent as they are unable to afford to buy a house in Toronto.
One of the best places to invest is in Mississauga, which is Toronto’s closest neighbour. The University of Toronto has a campus here, and a lucrative career market attracts many people to the area. Here are a few of the neighbourhoods to watch out for:
Recent and upcoming developments have turned Lakeview into one of the most highly sought-after neighbourhoods in Mississauga. Larger than average lot sizes and relaxed zoning laws allow you to rebuild small bungalows into modern, spacious homes. It’s a beautiful area and is highly convenient for commuters. Close proximity to Toronto and the Lakeshore Go Line makes this a prime area to invest in.
Find out more about Lakeview in our community guide right here.
Relatively low price points make this neighbourhood ideal for a first-time investor. However, don’t make the mistake of thinking these lower prices mean the area is hard to rent out. Lisgar is one of the most desirable neighbourhoods for tenants and is especially attractive to commuters. In addition, the many parks and green spaces give Lisgar great appeal to anyone who loves the outdoors.
Find out more about Lisgar in our community guide right here.
The City Centre is the heart of Mississauga! This is where you’ll find all of the hottest new condominiums, Square One Shopping Centre, Celebration Square and numerous other attractions in the area. The City Centre will also be home to the Hurontario LRT (Hazel McCallion Line), which is scheduled to open in Fall 2024. Once completed, this development will connect commuters from Brampton through Mississauga to Port Credit.
An influx of new company headquarters and business start-ups is attracting many single professionals, young families and downsizers. Any rental in this neighbourhood is sure to get snapped up quickly.
Find out more about the City Center in our community guide right here.
The houses in Meadowvale tend to be smaller and more affordable than in other neighbourhoods in Mississauga. It’s also known for its high-quality schools, convenient shopping, and abundance of outdoor activities and sports. With many head offices in the area, new residents have plenty of career opportunities.
Find out more about Meadowvale in our community guide right here.