Investors are currently reassessing the value of residential rental properties in today’s market because of record low interest rates in Canada. To make matters worse, the global economic indicator of mortgage rates is showing a scheduled increase. Everything considered, it makes sense that people looking to invest in real estate are wary, but this hesitation is not necessarily warranted. According to a recent article published in the Financial Post, there is no such thing as a bad time to invest in rental property.
Exemplified through the Toronto market, rental real estate is a very consistent source of revenue for investors. According to the Toronto Real Estate Board, from 1992 to 2011, the average price for a home rocketed up from $214, 971 to $465, 412. That is just the price of the home itself, not including the additional profit made available by rental returns.
In the past twenty years, there have only been four years with negative returns in the Toronto market (this was from 1992 to 1996). That means if you purchased an average home in Toronto in 1992, achieved tenancy that covered your property’s taxes, maintenance, the property’s mortgage interest, and the basic expenses of the building itself, you will have achieved an 11.40% annualized return on your investment by the end of last year.
But just like in any investment, real estate still has its risks. The biggest issue facing investors isn’t a matter of when to invest so much as all the additional concerns that go along with renting. People tend to buy more property than they can deal with and not handle their tenants properly, leading to investors having to sell off at a loss to cover debts accrued from the building.
In order to profit and invest effectively in today’s real estate market, investors have to make sure they cover their bases before purchasing. Check out the neighborhood and make sure people will want to live their, be diligent with tenants, and understand that each month is different – the market fluctuates and even a good tenant won’t always make rent on time. Most importantly, invest in real estate with the mindset of being in it for the long haul; even if you are looking to flip it quickly, the market may not be appropriate and an investor has to be ready to hold a property over an extended period of time.
Investing in real estate requires patience for the market and active upkeep of both the building and the tenants occupying it, but remains a high quality opportunity for investors seeking security and growth. That being said, if an investor is ready to deal with the associated risks and problems of rental real estate, any time is a good time to invest in rental property.
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