You’re considering buying some property to rent out and aid you with bill payments, all the while building equity and increasing in value. Well, you’ve come to the right place. Revenue properties are a fantastic way to increase your savings and financial stability all the while covering monthly expenses. They are essentially properties that have space to rent, providing steady income from that investment.
Revenue properties are a great way to build equity, spread what equity is available out, and leverage financing. You can own several properties and have mortgages on all of them. This scenario works especially well if the properties were smart purchases as real estate in the first place, and the monthly cash flow from revenue covers all expenses, including mortgage and maintenance costs.
What kind of properties?
Commercial building (commercial building with apartments above) in future development sections of the city are a wise investment tool along with a tri-plex scenario (all residential). These could be sustainable for years if done properly.
Be prepared and understand the implications:
Ensure you are diligent with the community and the building with any issues that may arise so your investment is placed wisely for the long term.
Also, at a certain point the owner is considered in the business of rentals, so there are income tax implications when the property is sold, triggering capital gains tax. None of this is problematic if these circumstances are known from the beginning and planned for though, thus preventing you from losing any money in the process.
It is crucial to search for the right tenants to reside in the property and maintain it. It should be people who you are comfortable with living there, have solid credit history and stable employment, positive references and who you believe to be responsible to maintain the property. You can absolutely hire professionals to help manage the properties, but bear in mind this will be another expense to plan and budget for.
Be wise regarding financial decisions
It is important to keep your eye on all finances, for this is a long-term commitment. This is a buy and hold for a length of time strategy, completely different than flipping a house. Flipping is risky business at the best of times, this is a financial decision you will stick with for some time. While earning revenue to cover expenses, you are seeing the property increase in value over time due to a steady increase in land value.
Have an exit strategy
You are not simply a homeowner anymore, but an investor (snazzy). Plan the length of time you would like to be in ownership of the property, any changes that will be strategic along the way, and what your exit strategy will be when it comes time to let go. You can plan to sell in an open market, auction off, or pass on through inheritance, and when this time comes, hopefully you will have reached any desired goal you had for the property initially.
Daniel S. is obsessed with Real Estate. When he is not going to open houses he is looking for new properties on sites like HeatherMac.ca.