Are you interested in an Investment Property? This blog is for you:
What to Look for in a Rental Property Investment?
Location, Location, Location: 
When it comes to Rental Cashflow Properties, location reigns supreme. I've emphasized this in many of our discussions, and it can't be stressed enough. Location directly impacts the caliber of tenants you'll attract. A great location, with low crime rates, excellent schools, recreational amenities, and efficient transit options, draws in top-tier tenants. Plus, properties in prime locations have shorter turnover times, ensuring your investment stays consistently occupied. Moreover, a prime location can substantially boost your ROI over time. It's all about supply and demand, and in real estate, the demand is always high in prime locations.
Research on Vacancy Rates/Rent Demand
Before making any investment, it's wise to conduct a fair market rent analysis. Even in great neighborhoods, this analysis provides a benchmark for what you can expect in monthly cash flow. It's also crucial to assess how long properties have been on the market before being leased. A prolonged "days on market" trend may indicate lower rental demand, something you want to avoid.
Prefer Freehold over Condo
If your budget as an investor allows to purchase a freehold property, you should try to see you do that; even if it means changing your location and going further west or east. It has a multifold benefit, just by doing this there is no leakage on your monthly cash-flow from the asset. In the residential rental market here in the GTA the monthly condo fee maintenance is borne by the landlord. Let take an example that you buy a 1-bedroom plus Den condo in Square One area of Mississauga and your monthly rent is coming as $2,700. Your maintenance fee is $550, so your effective rent remains $2,150 only. In addition, freehold properties tend to appreciate at a faster pace, making them more attractive for future resale. Also, due to the same reason of monthly fees the time comes to sell, a general buyers would prefer freehold, as they feel the amount going towards the condo fee could might as well contribute in their mortgage payment. If that gets them a better asset with more space and no fees.
This is coming purely from my on ground experience and dealing with multiple clients and investors with varying needs and price points and also analyzing multiple properties as case studies to see their purchase price and disposition prices, and reviewing same in multiple asset classes in similar time span.
Also, I want to point out that today's topics is for investments, condos would work if you want to use it for your own living and there may be situation where for your job accessibility you would want to live in downtown or north York areas or Vaughan etc. Or it could be that a family budget ceiling is less and they want to be within the GTA for job prospects, so they will have to go with a condo purchase. For investments the location can be flexible, as you would understand, and that's the very reason for my recommendation. The real estate investments should be done in a very detached way, with no emotional involvement. Its a pure business decision, you may like a certain town as you have lived there for 15 years, that doesn't mean that when it comes to investment you cannot invest in a town which is 20-30 kms away, if it makes business sense, then why not.
Cash Flow Analysis 
You as an investor should take into account and commission for the yearly property tax which you pay to the municipality, the condo fees, if you invested in a condo and some budget earmarked for the maintenance and up-keep for the asset. These costs are part and parcel of Real Estate investments, and your rental revenue should balance more or less with the expenses and in the ideal situation still generate a positive cashflow for you. However, at times you will see that will not hold good, and you might be paying some amount from your pocket per month, but when you see the mortgage principal contribution as well which largely gets paid by your rental revenue, you will be net positive. This precise point sometime investors fail to acknowledge and they are only looking at the positive cash flow. With the emerging Real Estate market like GTA you will always have equity built into the asset provided you don't decide to sell in the short order. Real Estate is a long term investment and if anyone shows you a get rich quick scheme, be vary as there is nothing like that. It would require from you a lot of patience and perseverance to carry a property for a foreseeable future to ensure that you can bank on the equity built.
Property Management
For investors with multiple properties, hiring a property management company can be a game-changer. While it's an additional cost, it offers peace of mind and allows you to focus on your core responsibilities and work.
With the effort and time spent to build an investment portfolio, with time you can leverage on the asset not just by selling the asset. But you would also refinance the asset and get the equity out of it as a secured line of credit, this will help you to utilize and further expand your portfolio. The real estate market is a very dynamic market and things change dramatically, but if you ensure you provide seeding time to a property and carry it as a rental for 5-7 years minimum, believe me, you will do very well! Real estate is a long-term game. There are no get-rich-quick schemes, but with patience and dedication, your investments will flourish.
Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.
Mudit Mehta
Broker of Record
ELIXIR REAL ESTATE INC.
Off: 416-816-6001 | [email protected]
.
