http://LeahCoss.ca
So obviously, we've got our traditional buy and hold. And what buy and hold is is where you're buying an additional home, one that you do not live in and you're renting it out. So you're buying it, and you're holding it.
Where you're making income is, hopefully, the rental payments covering the mortgage payments, which is then having that little bit of principle every month that gets packed away into equity that you then get to have. So someone else is essentially paying the mortgage for you.
Now, how is this a good or a bad investment? Well, there's things you need to account for. One: Does the rental payment cover not just the mortgage payment, but things like the heat and other things that come into equation, maintenance on the home as well as yearly property taxes. If it's not covering those things, this is costing you money as an investment standpoint. So that's something important to remember.
The other thing is what about when it comes time to renew the mortgage on that home? What if rates are different? What if rates have gone up by two or three percent? Which, these days, it seems very likely. If that's the case, now your mortgage payments are higher and, again, will the rental payments cover that?
Now, if you're OK with taking a loss and you're just simply in it for kind of like having that additional savings account where it's just putting the money away for you in the equity, then great.
But if you're looking at this where you're actually wanting to get a return back every year, you need to account for potential increases in your payments and evaluate if the market does fluctuate in rental income, or maybe you can't charge as much. You need to make sure that you're still at least breaking even and, hopefully, profiting.
Now, what else is there out there? Well, obviously, there's the buy and flip was really big all the last five years or so, but it's really a dying trade. Why? Because house prices are not making the same jump anymore. I'm sure it will come back on the scene, especially with prices being so low in the states right now.
People can start gathering them up at less than $100,000 purchase prices, and then hopefully be able to flip them later on. But not the best time to be doing it at this exact point in time, being 2010.
So what buying and flipping is is where you're buying a house; hopefully, for below market value for whatever reason. You're fixing it up by either staging it nice, doing full renovations, additions; things of that nature, and then selling again. And you're hopefully doing this within a couple of months because what you're doing is you're basically buying it, output of money for the down payment, paying the monthly mortgage payments.
So again, the shorter time line, the better. But again, outputting. Then you're paying money for laborers. If you're not a contractor yourself, you're putting money out for fixtures, all those finishing touches, new flooring or whatever it is you're doing to renovate the home, make it more appealing, and then selling it.
And if you're not using a Realtor, well then I hope you know what you're doing because that's also an output of money.
So there's a lot of money up front and you cross your fingers you're going to see it in the end. Very risky, but very profitable if you know what you're doing and when to do it, which is key. So that's the other one.
Now, the other strategy is actually becoming very trendy right now, and it's an alternative to the buy and hold. So buy and hold being the rental property. What this is is buy, and then lease it out.
And in some situations, you're not even buying until you find someone who wants to buy the house, or eventually buy it but they can't afford it right now due to perhaps not enough down payment, bad credit, new immigrant, self employed or something of this nature. For whatever reason, they cannot get approved today. But in two years from now, three years from now, they will be able to be approved.
And before you determine that yourself, get a mortgage broker like me or something to evaluate these tenant buyers to ensure that they can, in fact, afford this house someday.
But what it basically is is it's just like leasing to own a car, except you're doing it with a home. But you're the investor who's buying the home, and then someone is leasing from you. So what they're having to do is put a lump sum up front, so you're getting cash flow right away. Then they're paying market rent, which is giving you cash flow. And they're paying a bit above market rent, which is then going towards credit to help them with their down payment later.
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The BEST Real Estate Investment Strategies for 2011 - SWFLby CarneyHomes2,402 views
Canada real estate seems more intense than US real estate.
frea1able 1 month ago
Well, you know she is a pro in the mortgage industry by the 5 hour energy. I own an appraisal company and am a realtor/investor. I drink two a day! :)
Cobain1234 4 months ago
LOL, 5 hour energy drink and a crush pop. nice!
BeautyFinish 1 year ago