Many assume that real estate is a safe avenue for investing their capital, but is this always the case?
Generally, when looking to invest some of your hard-earned savings, real estate is certainly considered to be a great investment opportunity. Not only can you expect organic appreciation in value over time but renting out your property will also provide ongoing passive income. Some investors may chose to renovate their property with the intention of placing it back on the market at a premium, known as flipping. With many directions to take with the purchase of a property, the ownership of real estate is a proven way to build wealth.
With that said, blunders often occur when first-time real estate investors fail to take into account a number of factors peripherally associated with their investment.
As trivial as it may sound, ongoing maintenance costs as well as potential income gaps experienced between tenants are examples of overlooked factors.
The burden of a mortgage alone is attributed to why many financial advisors will warn against borrowing money to purchase property when possible. For this reason, it is advised that if you plan to rent out your property, you should make sure you are able to afford the mortgage payments without the assistance of monthly rental payments, as you may be without a tenant in a given time.
In addition, with regards to tenants, you may experience a high turnover, leaving you with periods of rental income gaps. If you wind up unable to afford your mortgage payment without the rental income you may find yourself with more of a financial burden, rather than a means of building wealth.
In the event you are unable to cover your mortgage payments for a period of time, you run the risk of a bank seizure and damaged credit score.
It is always important to thoroughly calculate all possible expenses, preferably with the help of a professional, when deciding to make a real estate purchase. Costs to consider include, different types of taxes, utilities, upkeep, and repairs.
For rental purposes, you may want to consider working with a property manager to assist with the collection of rent, acquisition of new tenants, and handling repairs. While there is an added cost to consider, the assistance of a property manager will help lessen the burden of responsibility and time associated with your rental property.
Consulting a specialized attorney is always recommended for any level of investor as we can advise and help implement optimal courses of action for achieving your respective real estate aspirations.
For any questions or concerns with regards to Montreal real estate feel, free to contact us through our contact form or give us a call. We’re happy to help!