I want to be a Real Estate investor, where and how do I start? Today we will focus on the buy and hold strategy.
Great question. First things first, $$. Do you know how much you can afford and can have you been pre-approved for a Mortgage?
I know it’s exciting but baby steps. You have to be diligent and have everything in place before you start. See my earlier post about how to buy a new property while keeping your existing home. That might give you some good ideas about how to do it.
Next, you have the funds to buy a property, please find a great Realtor to help. Someone that has experience in owning, they can share so many real world experiences, why not take advantage of that knowledge?
Ok, financing and great Realtor out of the way. What’s next? That depends.
What are your goals and what are you hoping to accomplish. Is the market receptive to a flip? Do you want to buy a property that has multiple units, and you live in one? Or, perhaps avoid the tax man and live in a “project” that takes more than 12 months.
We have a great team of renovation experts that we have used for other projects. If that’s holding you back, no need! Everyone wants new. That’s the good news, because you won’t have as much competition for a place in original condition.
Guess what happens to the value of your home when you do a renovation, it goes up. Guess what happens when you buy someone else’s project, nothing. You probably paid market value, so now you have to wait for it to appreciate. Now if you did the renovation, the value of your property has increased = equity. That’s what I like.
Maybe you don’t have the time but you know the value of real estate. You can talk to us about that scenario as well. Definitely talk to us about that. We can and will help. I won’t discuss the details here but let’s do it!
So 2 opportunities exist with Real Estate, appreciation and realized gain through a project that provides an increase in value after the sale of the property.
Today let’s talk about buying and holding a project property. First you have to have a great Realtor like yours truly. We help you identify a property that needs to be fixed up and can be used as a rental. Now keep this gem in mind if you are currently renting.
Continue renting!! Stay in your existing property, rent while be being a landlord as well. Why? Well, when you move into your own place you now have all the bills to pay. Why not let someone else pay the bills while you accumulate wealth.
How? Well, buying and holding is really the trademark of most successful real estate investors. Why? Because the tenant is paying your mortgage. In a market like Vancouver, the market is appreciating in value. So you gain $$’s from both appreciation and mortgage pay down.
Let’s take a $600,000 Condo for instance. The down payment is $150,000. The monthly mortgage payment is $2,100. At the end of 5 years you have $66,000 in equity from just the mortgage pay down. Let’s assume that the market is stagnant in Vancouver, not likely but let’s say 2% a year for the next 5 years.
That Condo is now worth $663,000 at the end of 5 years. So another $63,000 in equity on top of the $66,000. $129,000 in 5 years, or $25,800 per year you have made. Not so fast. We found you a gem, it required some work. So we did the renovation in 6 weeks for $50K and that allowed you to rent it out for more $$’s.
So this is how Real Estate Investors start growing their stable of houses. Anyone play Monopoly?
So that $600K Condo has been renovated. Now you tell the Bank that you did a renovation and you want them to appraise it. Now keep in mind that you paid $600K, but that was below market value because you had a great Realtor, and, you bought a property that was in original condition so it sold under market value. Typical for fixer-upper properties.
Ok, here is where it gets fun. The Bank tells you that the new appraisal comes in at $725K. Nice job but what does that mean. It means that you can go back to the Bank and refinance the property while taking equity out. What does that mean? That means that you are now closer to having another downpayment for another property.
You see where this is headed! Buy, renovate, rent, appraise, refinance, repeat. You are still renting but you own property that is appreciating in value and making you money. If you move into the place then this option doesn’t exist. So keep renting and be proud and make some money for yourself!
You might also like: Real Estate Investing: The good, the bad and the ugly
Have any questions about Real Estate and Investing, contact us today. I can be reached at [email protected] or 778-228-2448. Check out our Youtube Channel for more videos: https://www.youtube.com/channel/UC0C7-SMxZTkI45TqLeskfDw
