What is Investment Real Estate?What is Investment Real Estate?

How do I profit from investing in real How do I profit from investing in real estate?estate?

How do I find the right location?How do I find the right location?

Am I financially equipped to invest?Am I financially equipped to invest?

What are my borrowing options?What are my borrowing options?

WHAT IS INVESTMENT REAL WHAT IS INVESTMENT REAL ESTATE?ESTATE?

Real estate that generates income or is otherwise Real estate that generates income or is otherwise intended for investment purposes rather than as a intended for investment purposes rather than as a primary residence. It is common for investors to own primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a multiple pieces of real estate, one of which serves as a primary residence, while the others are used to primary residence, while the others are used to generate rental income and profits through price generate rental income and profits through price appreciation. appreciation.

The tax implications for investment The tax implications for investment real estate real estate are are often different than those of one’s principal residence.often different than those of one’s principal residence.

Source: Investopedia

HOW DO I PROFIT HOW DO I PROFIT FROM INVESTING IN REAL FROM INVESTING IN REAL

ESTATE?ESTATE?AppreciationAppreciation::

The most common source for real estate The most common source for real estate profit is the appreciation - the increase in profit is the appreciation - the increase in the value - of the property in question. the value - of the property in question. This is achieved in different ways for This is achieved in different ways for different types of real estate. And, most different types of real estate. And, most importantly, it is only realized through importantly, it is only realized through selling or refinancingselling or refinancing..

Raw Land:Raw Land:

The most obvious source of The most obvious source of appreciation for undeveloped land is, appreciation for undeveloped land is, of course, developing it. As cities of course, developing it. As cities expand, land outside the limits expand, land outside the limits becomes more and more valuable becomes more and more valuable because of the potential for it to be because of the potential for it to be purchased by developers. Then purchased by developers. Then developers build houses that raise developers build houses that raise that value even further.that value even further.

Residential Property:Residential Property:

When looking at residential properties, When looking at residential properties, location is often the biggest factor in location is often the biggest factor in appreciation. As the neighborhood around appreciation. As the neighborhood around a home evolves, adding transit routes, a home evolves, adding transit routes, schools, shopping centers, playgrounds schools, shopping centers, playgrounds and so on, the value climbs. Of course, this and so on, the value climbs. Of course, this trend can also work in reverse, with home trend can also work in reverse, with home values falling as a neighborhood decays.values falling as a neighborhood decays.

Income:Income:Generally referred to as rent, income - Generally referred to as rent, income - or regular payments - from real estate or regular payments - from real estate can come in many forms.can come in many forms.

Raw Land Income:Raw Land Income:

Depending on your rights to the land, Depending on your rights to the land, companies may pay you royalties for companies may pay you royalties for any discoveries or regular payments any discoveries or regular payments for any structures they add. These for any structures they add. These include pump jacks, pipelines, gravel include pump jacks, pipelines, gravel pits, access roads, cell towers and so pits, access roads, cell towers and so on. Raw land can also be rented for on. Raw land can also be rented for production, usually agricultural production, usually agricultural production.production.

Residential Property Income:Residential Property Income:

Although it is possible that you may earn Although it is possible that you may earn income from the installation of a cell income from the installation of a cell tower or other structure, the vast tower or other structure, the vast majority of residential property income majority of residential property income comes in the form of basic rent. Your comes in the form of basic rent. Your tenants pay a fixed amount per month - tenants pay a fixed amount per month - and this will go up with inflation and and this will go up with inflation and demand - and you take out your costs demand - and you take out your costs from it and claim the remaining portion from it and claim the remaining portion as rental income. While it is true that you as rental income. While it is true that you will get an insurance payout if your will get an insurance payout if your tenants burn down the place, the payout tenants burn down the place, the payout only covers the cost of replacing what is only covers the cost of replacing what is lost and is not income in a real sense.lost and is not income in a real sense.

HOW DO I FIND THE RIGHT HOW DO I FIND THE RIGHT LOCATION FOR INVESTING IN REAL LOCATION FOR INVESTING IN REAL

ESTATE?ESTATE?

1.1. Choose a knowledgeable realtor.Choose a knowledgeable realtor.2.2. Know the community – understand Know the community – understand

the local demographics, economics the local demographics, economics and other social variables.and other social variables.

3.3. Have clear cut investment objectives Have clear cut investment objectives – are you looking for a quick profit or – are you looking for a quick profit or long-term cash flow?long-term cash flow?

AM I FINANCIALLY EQUIPPED AM I FINANCIALLY EQUIPPED TO INVEST IN REAL ESTATE?TO INVEST IN REAL ESTATE?

Cash – for down payment, legal costs Cash – for down payment, legal costs and any renovations, permits etc.and any renovations, permits etc.

Credit rating – is it satisfactory? And Credit rating – is it satisfactory? And can I qualify for a mortgage?can I qualify for a mortgage?

Income – can I afford the mortgage Income – can I afford the mortgage while the property is vacant or during while the property is vacant or during the renovation period?the renovation period?

What resources do I What resources do I need?need?

WHAT ARE MY WHAT ARE MY BORROWING OPTIONS?BORROWING OPTIONS?

1.1. Family and friendsFamily and friends

2.2. Bank, credit union or trust companyBank, credit union or trust company

3.3. Monoline or mortgage companyMonoline or mortgage company

4.4. Private lenderPrivate lender

5.5. Use of RRSP fundsUse of RRSP funds

RENTAL EXPENSE SHEETRENTAL EXPENSE SHEET

YOUR PROPERTY INVESTMENT YOUR PROPERTY INVESTMENT TEAMTEAM

1.1. RealtorRealtor

2.2. Mortgage ProfessionalMortgage Professional

3.3. Home Inspector Home Inspector

4.4. Real Estate LawyerReal Estate Lawyer

5.5. Property AppraiserProperty Appraiser

6.6. ContractorContractor

7.7. Handy man/womanHandy man/woman

8.8. Home stager Home stager