If you're just starting out as a real estate investor or are thinking about investing soon in the Calgary market, here are the top 5 investing tips you should know. These are the factors that will ultimately determine your profits and help you become a successful investor.
Compare the rent to the property value
Find out what the going rents are in the local market before investing in a rental building. You'll need to make sure first that the rents will be able to support the income you require to maintain the building and make the mortgage payments. It would also be nice to have some extra change in your pocket at the end of the month from your rental income.
Consult a tax adviser
In some cases you can actually end up losing money when you invest in real estate. Find out from a tax consultant to find out how an income property can add to your income and how much you should ideally be spending on a property in order to come out ahead. Tax laws can be extremely complicated so it's best to consult with a professional before jumping into any investment opportunities.
Learn about the existing tenants
Before taking on the responsibility of a building that already houses tenants, learn more about the people that live there and what types of leases they have signed. Find out how long each tenant has stayed in their unit and how long each lease is. This way you'll be able to create a marketing plan based on the tenants and when their leases will expire.
Determine all of the costs involved
Find out exactly what types of costs you're going to incur as a result of purchasing the building. Be sure to take closing costs, taxes and insurance into account on top of the mortgage payments. Once you find out the exact numbers you'll be able to decide whether you can end up in profit based on your outgoing costs and the number of tenants that reside there.
Keep things real
It's rare (if not impossible!) to find a building that is occupied 100% of the time. Some people skip out on their leases when you least expect them to and people also naturally move on to home ownership or move to another building. Find out from the previous owner what the average vacancy rate was and look through the numbers for yourself. In an ideal scene the building will house a lot of long-term tenants and have a fast turnaround of new renters when units do become available.