Real estate investing can be as punitive as it is rewarding. If you don't know what to invest in, you could end up losing money. On the flip side, understanding the ins and outs of the real estate investment world will give you an upper hand. It ensures that you understand the best locations for investment, when to make a purchase, and how to keep growing your investments.
Before making an investment in Toronto condos, or any other form of real estate, you need to establish your investment goals. Are you looking for a short-term flip? Do you have an idea of your budget? How much do you understand about the market? It is easy to get carried away if you don't have an understanding of your investment goals. Here are some important real estate investment rules to follow:
Know Your Market
Knowing everything about the market you are interested in investing in is essential. There are multiple market drivers that will determine the success of your investment. A poor market could easily drag down the value of the finest properties. On the flip side, you can get some of the best deals by investing in growing markets.
You need to look for real estate market drivers like sales price history, unemployment numbers, demographics, tax rate changes, new housing permits, and population figures. You can easily find this information in local and regional publications like TRREB. Be sure to also research new initiatives or investments that could drive people to the area.
For instance, having a new major employer move into the location could result in an influx of interested tenants and buyers. Market drivers are too important to ignore as you conduct real estate investing research.
Understand Your Numbers
Real estate investment is a numbers game. If you have complete visibility of how and where to spend your money, you can make informed decisions. You need to understand your financing options as well as the costs and expenses you will incur during the acquisition.
If you are investing in a fixer-upper, you should be comfortable with the renovation costs. Most importantly, ensure that you can be in control of your property's cash flows. Even though your property is bound to increase in value, poor cash flows can force you to sell it too early. Positive cash flows ensure that you can keep maintaining and running the property as you watch it increase in value.
If your strategy is to buy and hold, understanding the rental market is essential too – it will be a huge contributor to your cash flow health. You should also understand what the resale market looks like. Knowing whether it is a buyer's market or a seller's market will determine how easy it is to get the property sold.
Play the Long-Term Game
The longer you hold a real estate property, the more it appreciates. Sure, you can always invest in a short-term flip, but you will be losing out on the property's appreciation. Holding on to a property long-term helps you study the real estate market even better. You can learn of new developments or job opportunities that will drag people to the area.
In case the market falls, you can use the property to trade up for a higher-valued property. Since there is typically less competition in falling markets, getting top-tier properties at a lower price than normal is easy. Focus on the long-term gains you can get from your property to optimize your investments.
Set and Achieve Your Goals
Always define your goals from the onset when investing in real estate. Any investment that doesn't align with your goals is not a good investment for you. Most importantly, be sure to study your target real estate market to make the right decision.