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Real estate investing in Canada may be incredibly attractive right now, but it always pays to invest wisely. The key to safe and profitable investment is to stick to the core principles which have proven themselves over time.
No matter how attractive a real estate investment opportunity may appear, make sure it checks the boxes on this list of essential investment principles:
1) Make Your Money When You Buy
Speculators in many different markets may have made millions, but unless you are really comfortable gambling with your nest egg, it's a lot wiser to make your money when you buy. This means making sure an investment is profitable when you get in. This could either mean the property is already cash flowing, has built in equity, or at least can be resold for a profit.
Timing is a huge deal when it comes to the profitability of a real estate investment. There is money to be made in all market phases in Canada, but it can be far easier and more profitable when buying during the best phases of the cycle, allowing room for growth.
3) Know How to Add Value
Value can be added to real estate in any market, but it is a lot better to have a strategy before diving in. What can be done to increase the value, appeal and profitability of this property? How much will it cost? How long will it take? Who will take care of it?
4) Location, Location, Location
If there is a single golden rule in real estate investment it is location.
It doesn't matter whether money is being put into stocks, in bank savings accounts, under the mattress or in real estate; diversifying is a smart move.
6) Have a Tax Strategy
Having a tax plan can make double digit differences in the returns from real estate investments every year, and can add up to a whole lot more in the long term.
7) Have an Exit Strategy
Know your exit before you enter. What's your plan for exiting this investment? How long do you plan to hold it? How much is it likely to be worth then? What other exit strategies may be used, especially if desiring to cash out ahead of schedule?
8) Property Management
Have a professional property management firm lined up. All opportunities are only as good as the execution and ongoing management. Who will take care of yours?
These few principles will help you protect your investment capital and maximize your investment returns over the long haul.