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 INVESTING IN REAL ESTATE
 

Are you ready for an Investment Property?  If so you're not alone!

 

 

But are you ready for the next step to actually buy a rental property? Before you dive in, make sure you do some research first and find out what it is really like to be a landlord. There is a lot to know and it can be a lot of work. But that does not mean it is not worth it. If you want to be successful, you must understand what to expect before you begin investing in Real Estate.

 

In order to be successful you will need a team of professionals who can support you through this process. Contact us any time and we will help you get started on your way to financial freedom.


  This page is for information only and is not a replacement for legal tax advice from your Accountant or Investment Advisor

 

 

Investing in Real Estate can be very lucrative, in fact many consider it one of the best vehicles for Retirement Planning. If you are considering investing in Real Estate you need a risk management strategy. Here are some strategies to help protect yourself: If you are planning to use your investments to help with your retirement this is for you!

1) The safest way to retire early with real estate is have serious coin for contingency funds and completely pay off your mortgages so that you have minimal expenses and to reach a number that you are comfortable living off of.

2) Build a large reserve fund covering all of your known unknowns. Known unknowns are events that are known to happen but you don’t know when. The key is to assign budgets for these individual events.

Here is a simple example:

A vacancy is likely to happen once every two years, costing $1000/2 years/property=$500/year/property.

A roof repair is likely to happen once every 10 years, costing $5000/10 years/property=$500/year/property.

Tree maintenance is likely to happen once every five years $1000/5 years/property=$200/year/property.

If these are the only known unknown events for your one property, you add up all of the above for a total of $1200 per year for your one property. This is your contingency fund.

3) Build a reserve fund to cover two months of expenses for every property and commit to replenishing when you draw from it. The problem is that it won’t cover large expenses like replacing a roof, removing trees, or repairing exterior work if all your repairs and vacancies come at the same time.

For example, if your mortgage payments are $1000 dollars per property and repairs cost is $500/year for every property and you have ten properties. Your reserve fund would be ($1000 *10 properties + $500 * 10 properties) *2 months = $30,000. Not everyone has $30K just lying around and I personally do not like holding that much cash in a separate account.

4) Build supplemental plans for increasing your rental income. Some creative ways to boost your income include: renting out parking spots, renting out storage space, charging for laundry, adding a secondary dwelling suite to your unit or turning the units into short term furnished rentals. Be creative.

5) Have a secured line of credit for each property based on the equity you’ve built up. This is your life line to each property. This provides security and access to fast cash for unexpected large expenses, i.e. the unknowns unknowns.

6) Be proactive with your repairs and maintenance. It sounds counter-intuitive to spend money upfront but if you ignore it, it can turn ugly later. This is why I routinely maintain my trees: to avoid damaging roofs, for safety reasons, and to prevent the larger expense of removing a dead tree. Routinely check your furnaces and conduct tune-ups to your air conditioner to increase the longevity of the units.

7) Hustle, hustle, hustle to reduce vacancies. If you personally manage your properties, you have to be very proactive with marketing your property. If you have property managers, you also need to be very proactive in overseeing your tenant turnovers to mitigate vacancies.

8) Have good relationships with your tenants. Treat them with respect and be a good landlord. They are paying down your mortgage and living in your units and you rely on the cash flow they are providing. That money keeps coming in as long as you own the property and have good relationships with your tenants.

By Tracy Ma-http://financialnirvanamama.com


Kim Robbins & Gord Karpinsky
Kim Robbins & Gord Karpinsky
REALTOR®