How can I turn a real estate investment in an asset?
Now is an excellent time to invest in real estate. Apart from obvious benefits behind this type of investment, it is a great way to grow one’s net worth as well as differentiating oneself from ordinary investors. Today, buying a property to rent requires more thought than considering how pretty the crown mouldings are or how nice the building is. Today, it is all about the Return on Investment (ROI).
There are two main ways to make a real estate investment profitable in the future.
1. Buying below historical market value
2. Ensuring that the rental income provides a good return on investment
What is an ROI?
The ROI is a performance measure that expresses the efficiency of your investment. To calculate this, we consider the return of an investment and the cost of the investment. The result is expressed as a percentage. An ideal ROI on a property will spark from a down payment of 25% along with a 75% mortgage. Also, it would be essential to take advantage of low interest rates to produce a better return.
A Real Estate Example
You purchase a $280,000 condominium. You make a down payment of $70,000, which leaves your mortgage at $210,000. The mortgage is on a 5-year term, with a 25-year amortization period, at 3% interest. This leaves your monthly mortgage payments just around $1,000/month, therefore $12,000/year. Some annual fees such as taxes are $2,400; school taxes are $400; and condo fees are $2,000. Rental income is $1,500/month, therefore $18,000/year. You then find yourself in an unprofitable, break-even scenario.
But wait! After all these numbers, what is really important is all the invisible magic that happens behind the scenes of the bottom line. Typically, a property’s value should increase by approximately 2% every year. Over 5 years, the property’s value will have increased by $28,000. This means the asset that is your property will be worth more 5 years after the purchase. Your mortgage balance will be going down but certainly not the contents of your wallet. With added value to your property, you can rest assured that your ROI will be at a satisfactory level.
The above example is not the best-case scenario. The value growth rate can definitely go over 2% and a rental income of $1,500 for a property priced at $280,000 is certainly easy to achieve in the current market.
Now, you may wonder: “Where do I start?”
Pierre can help you find a property that will prove to be beneficial when it comes to ROI. In terms of location, below are some reasons why Montreal is currently a great place to begin this process with him.
Why should I Invest in Montreal real estate?
1. Montreal is an underpriced real estate market. At the moment, the combination of the very low Canadian dollar and overall low market prices can bring your real estate buck a long way.
2. Neighborhoods are starting to get revitalized. Some covert Montreal neighborhoods are attracting young and wealthy professionals – why not take the chance to invest in these before they reach their full potential value?
3. Europe is closer than you think. Take Old Montreal, a neighborhood rich in history and charming facades that bring a feel of Europe closer to you.
4. It is attractive at an international level. In Montreal, you can find world-renowned attractions and universities. According to the Economist, it is also the second best city to live in. Montreal is the second largest city in the country and is the business heart of Eastern Canada.
5. Montreal is the “best student city in Canada”, according to Quacquarelli Symonds (QS), and ranked eight at the international level. The city belongs in the same ranks as Paris, London, Sydney, Hong Kong, etc.
6. Safety isn’t an issue. In the Economist, Montreal was ranked in the top 20 safest cities in the world.
What are some missteps to investing in real estate?
Not getting professional representation?
In some markets, you may not have all the information available to close a real estate transaction on your own. Without anyone to turn to, it will not be easy to fix unfavorable deals.
It is safe to assume that no investor wants to overpay for a property. Without proper representation, you can end up seeing a price tag higher than what you’d originally envisioned.
An investor should not be restricting their investment plans to their personal needs and wants. One should also consider what the majority of tenants are looking for and the current trends.
It is important to take the above missteps in consideration before entering the real estate investment world. By taking the right precautions, you can ensure that the journey will be successful, beneficial and fulfilling.
How can Pierre help you with your investments?
To succeed in real estate investment, you will want Pierre on your side. Before making the big purchase, Pierre will prepare a market analysis that will compare recently sold properties. He will emphasize the understanding of the analysis to his clients to gain insight on market trends. This approach has helped Pierre’s clients buy and rent properties for years.
Pierre has a growing network of professionals in the following fields:
By having these key contacts, you can sleep soundly and know that any potential flaws or risks will be mentioned to you.
✓ Immigration, Tax and Business Lawyers
✓ Mortgage Brokers
✓ Financial Advisors
✓ Educational Advisors – from nursery school to university
✓ Public, Private, Secular and Religious Schools
✓ Building Inspectors
✓ Building Contractors
Pierre’s expertise will help you choose some of the best properties in trending Montreal neighbourhoods, such as Bois-Franc, Downtown, Griffintown, Old Montreal, Little Burgundy, Plateau, Westmount, etc. By working within the above boundaries, Pierre has a more intimate knowledge of our market to better serve his clients. This extensive knowledge can bring the process of selecting a valuable property to new heights.
In essence, choosing Pierre to begin your real estate investment endeavors will prove to be an excellent decision. He will provide you with his market expertise, marketing skills and creativity. With these assets on your side, you can differentiate yourself from ordinary investors and have the tools to succeed. Pierre works in some of the hippest regions of the island it is without a doubt that we can find a match for your needs.