Tips for real estate investing in 2021 - RE Panel Episode 10
Friday Jul 16th, 2021
[00:00:00] Elyse: [00:00:00] okay. Hello. My name is Elise Bouwmeester and welcome to the 10th episode of the real estate panel. Today, we are going to be discussing some factors to consider when buying an investment property. So many real estate agents may already own their own home or thinking about owning their own home.
[00:00:18] And now want to look into the investment side of owning a property. Um, so we're going to talk to the panel today about this. I am a mom realtors. You can see a little head right here. She's going to be our special guest today, and I'm going to go through the panel and we're going to just talk about some factors that you should consider if this is something that you want to get into.
[00:00:37] So again, my name is Elise Bouwmeester with red and white Realty in the Waterloo region. I have divorced here. I have Mike and melody. We're going to start with divorce. What do you think? What are some factors?
[00:00:49] Davor: [00:00:49] Yes. Thanks Elise. Uh, the we're here from Ottawa with Weybridge Realty and we would joke these not my middle name.
[00:00:56] Um, and, uh, so what I want to discuss is if [00:01:00] you were considering of buying a vacation home, Uh, let's say you're looking at a vacation properties you want to consider, um, location, uh, number one thing, obviously you need to look into prior to, uh, purchasing a vacation property, what it is that people like to, uh, go on vacation in the nearby area.
[00:01:18] Uh, what you can afford, obviously affordability is a big factor. So when you're looking at vacation properties, uh, you find a good location that you like to see what you can afford and then consider how you can, uh, purchase that property. One of the ways is you can use your equity, your home. If you're already a home owner, uh, if you don't have a sizeable down-payment yourself, uh, obviously financials as with any purchase of a property are number one.
[00:01:46] So, so those are the two things that I can draw from, you know, for vacation. I mean, people don't go on vacations at the places that, that are, you know, that nobody goes to some people like to secluded areas. Some people go up in the woods. So, you know, cabin in the woods would be good. A lake [00:02:00] house would be great, uh, or, or a really cool seat electronical or, or, uh, I don't know, kitchen of Waterloo area.
[00:02:08] Uh, and they might get a nice little rental there and then, you know, post it up on Airbnb. But in any case, you know, look for something that you can afford and look for something that's rentable, number one thing, cause you need to be able to get a return. So that's all I have.
[00:02:23] Elyse: [00:02:23] Okay, perfect. Thanks dad. No, those are great points.
[00:02:26] I mean, location is obviously huge. A lot of people will say like, look at your location first, look at your house. Second. So, and it's also not a bad idea to even like, if you know somebody who has an investment property in the area, and you can find out who the owner is, ask them what kind of return for getting on it.
[00:02:41] So, yeah. Uh, what about you, Mike? Do you have any factors that we could
[00:02:45] Mike: [00:02:45] consider. Yeah, at least. Absolutely. So again, Mike, Chris broil a page in the meadow Holton Hills area. And at least I think, I think for me that the, you need to put into context for, for all people that are considering, this is, this is an [00:03:00] investment, right?
[00:03:00] So the numbers have to work guys. And you know, when you look at that, I've, I've really, you know, heard from a financial expert a long time ago. The one thing that you can really, really simplify here is we call it the 1% rule. So when you're making an investment and let's say you're buying a place that's $345,000, and you've invested a, also a few upgrades into that.
[00:03:26] So let's call it an all in at 400,000. If we use the 1% rule, it means that you're really looking at getting back, whether it's in a lease or multiple leases. $4,000 a month and then you've matched up. So, you know, ultimately you're not carrying any costs and you know, you've really covered yourself off that you're really adding to your investment.
[00:03:46] This is not how it work all the time, because there are going to be moments where your people, you know, you're buying a million dollar plus property and you're not going to be able to use that, that 1% rule. But the rule of thumb is, is that if you can cover off what your [00:04:00] mortgage is, then you're not ending up with any negative dollars at the end of those loans.
[00:04:06] And you're in a position where, you know, let's look at the market today. I mean the last year, depending on where you are, you went up about 28%. So if you cover your mortgage and you, you know, adding it to your investment, that's a huge win. But the other thing, at least that you got to keep in mind is that this is not just a purchase and done scenario, right?
[00:04:23] Because there are going to be other costs you need to put those costs in as homeowners. We all know that, you know, it could be property taxes, you know, it could be that you're looking at maintenance. Um, you know, maybe you're, you've had to hire a, a company that's going to manage that for you. At least there's a lot going on over there.
[00:04:40] I can see that it's this is, this is real-time video. Um, so you got to keep those things in mind. And I think one thing that new investors forget about is some of those big ticket items that just go wrong. Right? You know, if you've ever had to replace an AC unit, a furnace, maybe a roof [00:05:00] got to take all of this into your budgeting and into your planning.
[00:05:04] So that's, uh, that's for me really way to keep control over there. All right.
[00:05:09] Elyse: [00:05:09] I have no control over what is happening over here. Um, those are great though. I like the 1% rule and it is going to take a little bit of planning on your own part. And the little bit of like, thinking ahead, which is so important, because a lot of people are like, oh, I'm going to buy a rental property.
[00:05:22] It's going to make me lots of money. It's going to pay for itself. But you need to look at everything. I know when I had a condo listed, recently, investors were calling and they were saying, you know, what our rentals going for in that area. So these are questions that you should be asking. And as a real estate agent, I was able to give them some good answers.
[00:05:38] So, because I knew, cause I was also working with people who were renting. So great advice. Um, last but not least, we have our melody down there. So melody, do you have any other factors that people should consider when looking at investment? Yeah, that's
[00:05:52] Melody: [00:05:52] really, so I'm melody. I work with the forest hill real estate in Toronto.
[00:05:57] And so let's talk about property management. [00:06:00] So you've decided to purchase the condo or the house and you're looking to rent it out. So, um, you should be asking yourself how involved do you want to be with your investment property? Um, so you should be asking yourself, you know, do I already have a steady full-time job or would I like to hire a property management company to act on my behalf, as Mike mentioned.
[00:06:21] And some other things that you should also consider are the risks that are involved. So let's say when you buy the property, you might not have the rental interests that you're anticipating. You could end up having to pay for extensive repairs as well. And then another factor that was mentioned too, was that property taxes could go up and then the local market economy could change.
[00:06:43] So unfortunately, as drastic as COVID, we've seen so many rental prices dropped because of this and it's not necessarily, um, Just the fact of the price is dropping because of COVID. But let's say for instance, even with these condo buildings where the [00:07:00] amenities are closed, so all these other factors that lead to the price going down as well.
[00:07:06] And then, um, one last thing to keep in mind is that let's say you get a. Could go wrong. You just have to be very careful. You can have bad tenants and this could result in repair costs or even unfortunately eviction costs. So that's a couple of things to consider on the property management side.
[00:07:25] Elyse: [00:07:25] I love it.
[00:07:26] Thanks melody. And I'm seeing more and more property management companies involved. Um, I think that when people start seeing the great rate of return that these investment properties have, cause I think that we can all agree that investing in real estate is such a smart, smart decision. Just do your homework.
[00:07:43] Um, so there are, you know, investors out there that own multiple properties and they hire a property management company. Why wouldn't they. So, you know, that is a big expense, but then again, it saves that time for them to go and do money, making things. It's why real estate agents hire assistants and that kind of stuff.
[00:07:59] So [00:08:00] these are all great things. And then along which factors as well, you know, you can't always depend on the market to be booming. Like it is right now, so it could change and you know, you go and you say, okay, I'm going to sell my house. Three years and I'm going to make this amount back on it. And it takes, you know, he put it on the market and it's been two weeks and it's not selling, um, the market changes.
[00:08:20] So you have to be prepared for that anyways.
[00:08:24] Davor: [00:08:24] Um, I think if you, if you, if you do the math and if you, if you prepare ahead of time, you can always invest in real estate and then draw like, like the, the, uh, the rental business. You draw a monthly income, as long as you like might say you use one. You get your, your math in order and you can come out on top every month.
[00:08:43] So no matter what the real estate market does, you're always coming out on top because you're, you're having that recurring income. And then you can multiple properties that way. I mean, it's, it's, it is a big business and, uh, we as real estate agents are tapped to, to, you know, assist in that process as well.
[00:09:00] [00:08:59] So
[00:09:00] Elyse: [00:09:00] yeah. For sure. It's good. I think that, uh, even mortgage agents are tapping into this too. As some mortgage agents I've spoken to have talked about, you know, talking to your clients about, you know, you buy a house five years ago for 300,000 and is it worth 800,000? What kind of equity are you sitting on right now?
[00:09:17] Um, is that a whole nother market to tap into? So Charles is a Margaret, a mortgage agent, which I'm sure he wouldn't mind me saying it. That I connected with on Instagram. And he talked about this. He's got some great ideas. So, um, yeah, talking to a mortgage agent about it too, and just trying to make your dreams a reality.
[00:09:33] That's all I've got for today, guys. So thank you for joining us. Do you have anything else to
[00:09:40] Davor: [00:09:40] add? No, I just, yeah, I, because you're, you're busy with a little one. I thought I should just wrap it up and we call it a day. So unless anybody has anything else to add? I think this episode 10 until next week. I think we're sign out.
[00:09:57] Mike: [00:09:57] All right.
[00:09:58] Elyse: [00:09:58] Bye-bye. [00:10:00]