Having an investing in real estate is more than just buy, sit and watch your equity grow. Below are a few considerations that investors should consider prior to purchasing an investment property.

Calculate Realistic Income

Some landlords selling their investment property will beef up their numbers to make their investment property more attractive. Together we can take a critical look at the income and expenses of the properties/units and determine what is realistic or not. Since we close approximately 100 deals a year we have a unique perspective on rents collected. Beware of gross income statements as well as the net income will guide you better on whether or not the investment is good for you.

Rental Income Does Not Always Cover the Monthly Costs of the Investment Property

This is especially true with condo’s as maintenance fees increase with newer condos on a yearly basis to build up the reserve fund your rent will not realise such increases. You may be taking a loss on a monthly basis on but the equity growth over the years will be the true benefit of investment. Keep in mind that when you purchase an investment, larger deposits will offset the monthly loss and keep you from paying more interest to the bank. Depending on the situation it may be best to wait it out until you have a large enough deposit. Each investment must be looked at on its’ own credentials.

Calculate Yearly Vacancies and Tenant Locating Costs

Tenancies usually last approximately 16 months. This has a direct effect on your cash flow and should be considered prior to putting an offer together to ensure that you have the capital to account for vacancies. If you are relying on a realtor the rental commission is usually 1 month’s rent (1/2 payable to the selling brokerage).

Maintaining Your Investment Property

Depending on the investment landlord should consider the costs to maintaining the property. Condo’s have a limited amount of repair but you should still expect to repair appliances, doors, plumbing, or electrical due to normal wear and tear. The larger the investment the more items need attention. As a general example: roof’s, mechanical systems, electrical systems, landscaping, water proofing, eaves (soffit / fascia), driveways, appliances.