Make sure your Realtor can really be an Investment Property Adviser
1. What is the city zoning for the property?
If you have any plans to modify the current use, know if you can do it before you waive the conditions. Some municipalities only allow properties to be converted to 2-unit dwellings in certain parts of the community. If you are planning on tearing down an existing home and replacing it with a new property, know that city rules permit that as well.
2. What building code issues do you need to work with?
If you require any significant changes to the existing structure, understand that the building code may limit, restrict or alter your plans. In this case, seriously consider asking your Realtor to bring in a contractor with expertise in that work to guide you along the process.
3. What tenant profile do you want to attract?
If you are like most of my investors and the quality of the tenant does matter to you, go to the property or area at night. If the “freaky people” are out and you tell yourself I would never want to live there, or have my daughter live there, then consider moving your focus to a more desirable area.
4. Be honest with yourself.
How much work do you want to do to fix it up to your standards? Too many virgin investors want to look at the lowest priced properties on the market. There can be upside in appreciation by investing hard earned dollars combined with sweat equity. However, until the work is completed, it is difficult to find a quality tenant. The general rule is everything can be fixed. The issue isn’t whether it can be fixed but how much it will cost. Your great priced property can become expensive in a hurry.
5. How much can you afford to spend?
In Ontario, with very few exceptions, investors need to put 20% of the purchase price OR MORE down in order to take possession of the property. Add in the reno costs and you can be looking at $100K on a property of your money. Do you have access to those funds? I love using my home equity line of credit on my principle residence. No questions asked and I have access to the funds I need. Remember, you are paying 20% of the purchase and likely 100% of the renos costs. The cheaper property might actually cost you more of your own investment dollars, as you can’t always leverage the renovation.