One of the best investments to get into that’s relatively minimal and low risk with a great return, is purchasing a rental income property. If you earn $60,000 per year and your credit score is okay, you may be able to borrow money to invest in a low risk venture that can yield 80% or more per year through cash flow, asset appreciation, and principal reduction.
Think of it this way: If you invest $20,000 in the stock market, and make 15% per year on your investment, at the end of the first year, you would have $23,000 (which is considered a great return).
Now imagine investing $20,000 as a down payment on a $400,000 house. Using MLS statistics, single family detached homes have gone up 6.5% per year since 2001, and 3.5% since 2009. Even using conservative numbers like 4%, in just one year, your house would appreciate by $16,000. That alone is 80% return on your money in just 12 months.
What if you also had roommates, a suite you could rent out, and/or a garage you could rent for storage? What if that income paid your mortgage, utilities, property tax and insurance? Not only would you earn 80% per year from appreciation, but you will have paid off about $11,000 of your mortgage with somebody else’s money and possibly even made some extra cash flow for your pocket.
Altogether that is 135% profit year over year.
As you probably know there has been a bit of a downturn in the Calgary real estate market over the past few years. With that comes great opportunities. The perfect time to invest in income properties is when prices are low and inventory is high.
There are 3 important things to look for when choosing an income property.
The first is a Property that generates cash flow. It is important that the revenue you generate exceeds the total expenses of the property by at least 20%. A nicer area and more luxurious home, means you can charge more rent, but this also means a higher cost of purchase and increased taxes. The key is to buy a desirable space without blowing your budget.
Secondly, you want your property to go up in value over time. On average, single family detached homes in Calgary have gone up 4% per year since 1990. This is a trend I don’t foresee changing even with the boom and bust cycles Calgary goes through.
The third thing to look for when choosing an income property is having multiple revenue streams from the same property. That way, the chances of having zero revenue on any given month is much lower.
As a full time Licensed Realtor and General Contractor here in Calgary, I assist my clients in searching for and acquiring amazing rental income properties. With 15+ years experience in the YYC area, I can guide you through the entire process of finding a property with substantial rental/profit potential.
As a real estate agent, I can help you with:
- Finding a low cost house in a good neighborhood for renting to tenants in the current market, as well as one that will appreciate in the long run..
- Outlining your ideal tenant/rental scenario, while showing you what to expect realistically.
- Placing an offer, negotiating the purchase of the home with legally-binding sale contracts for peace of mind.
- Getting a mortgage with the best interest rates for future appreciation.
- Setting up home inspections, removing conditions, and taking possession of the home.
- Explaining both the risks and the potential of having a rental property and offering tips on lowering those risks and dealing with tenants.
- Listing the property for rent on major local advertising sites as well as the MLS System.
- Providing you with the right leases and rental forms that all good landlords should use.
Owning revenue properties is not as scary as it sounds and can be one of the most rewarding and lowest risk investments in your portfolio.
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If you are interested in investing in a rental property, please don’t hesitate to contact me. I will answer any questions you have with absolutely no obligation!
Jayson Shmyrko CIR Realty | P: 403-862-2427 | E: firstname.lastname@example.org.