Four tips for buying your first real estate investment property in Toronto

BY CLEVE DESOUZA

Deciding to buy an investment property is a big deal, especially for the first-time buyer. In a hot market like Toronto, it can be even more of a challenge, since values and availability seem to change almost hourly. However, for the would-be real estate investor with a little patience, and the right partners, it can also be a way to grow your wealth. Here are a few tips to keep in mind when buying your first real estate investment property in Toronto.

Tip #1 – Understand the math first
If you want to become a real estate investor, one of the very first things you will need to do is some basic math. This is key, because many people that just go out and start looking at properties before understanding the numbers, might be tempted to put in an offer for something that really doesn’t meet their financial needs. Whether you engage a professional accountant or financial strategist to help you, or you do it yourself, it is vital to understand things like market rent, repair costs, taxes and insurance, and other costs associated with owning the property. You can then plug in the numbers for prospective properties and easily see how it stacks up.

Tip #2 – Follow fact, not emotion
Seasoned real estate investors know the importance of research when it comes to buying a property. You are purchasing an asset for the sole purpose of financial gain; you can’t look at it through the same lens that you might use when buying a home for your family to live in. You need to be able to remove your own emotions from the equation and rely on data and facts to make an informed decision. Things like property value and market rent trends, crime rates, restrictions and neighbourhood rules, sales comparisons, and local code and permit requirements all can factor into whether you should buy or pass on a Toronto investment property.

Tip #3 – Have buying details worked out
In a hot real estate market, sellers are especially interested in things like speed and ability to close when reviewing offers. Before you draw up a purchase offer on a Toronto investment property, be sure that you have as many details as possible worked out on your end as the buyer. Do you have the cash available that will be required to close? Have you checked with your lender to be sure the prospective investment property will be acceptable? Has the underwriter pre-qualified you for the offer amount? Do you have an inspector vetted and ready to move? All of these things can help you move more quickly once you locate the right investment property, and can make your offer look professional and viable to a seller.

Tip #4 – Don’t be afraid to walk away
As you move through the diligence process of buying your first investment property, sometimes you find that things are not what you first thought. Maybe the structure is going to require substantially more repairs that you first calculated. Or, perhaps you learn that there are things about the property that make it a liability for insurance and to you as a landlord. While some things that are discovered along the way can be resolved, it is vitally important to know when to walk away. As a first time real estate investor, the last thing you want is to end up with a property that costs you dearly, and creates a financial draw instead of a wealth-building tool.

Final thoughts
Real estate investing is not a get rich quick scheme. However, it is a viable way to build equity and create a long-term source of passive income for yourself. As a first time real estate investor, it is important to learn all that you can about the financial and management side of real estate investing, be sure that you are ready mentally and financially to take the leap, and then take your time when choosing a property.