The planets have aligned if you’re an ambitious property investor ready to begin their portfolio.
Record-high rents in many urban centres of Canada have coincided with flat sales values as a fresh influx of properties has come on the market.
The Canadian Real Estate Association says a fresh spate of listings has brought the Canadian market back to 4.2 months of supply, which we last saw in February.
Interest rates may remain challenging, but investors’ mood is up because Canadian markets are becoming increasingly attractive propositions.
If you’re looking to begin a portfolio with the rental market running hot and properties offering true value, we’ve listed some essential tips. We hope you find them helpful.
Here are our eight essential tips for starting a portfolio.
Your motivation
A property portfolio is a long-term wealth builder, and achieving your goals over the years is enormously satisfying. However, if you want to trade frequently and make quick profits, you may be happier playing the stock market.
Great advice
Find a financial adviser to help you get started and stay on top of the constant legislation and tax rule changes. Unless you have the appropriate experience, don’t try doing this alone.
Money-maker
Creating a portfolio is all about building wealth, so don’t stray from this singular path. Purchases should deliver capital growth and solid rental income. Never buy an investment property because you “like it”. You won’t be living there.
Right focus
Before investing, identify the areas and styles of property you can afford. Most start with an apartment, but as your wealth grows, family homes will come into the equation because they deliver the best returns and most loyal tenants.
Capital growth
An investment property should always have the potential to rise in value. Make this a top consideration when buying.
Rental yield
Gross yield is the annual revenue your property generates as a percentage of its value. A good yield is around 5.5%. When prices shot north during Covid, many yields slumped to between 3% and 3.5%, convincing many investors to sell. With prices dipping and rents rising, yields are returning to their norm.
Positive cash flow
Experienced investors look for properties that will generate profit rather than lose money and allow them to claim the loss against tax. There’s nothing wrong with making a profit!
NOTE: The information in this article is general in nature and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.