How to Get Started Investing in Real Estate

Shortly before we got married, I moved into Tania’s house and became a landlord for the first time. She had rented out her basement years before and we decided when we were moving in together to sell my house and live in hers because the two of us really only needed so much space and the extra income would help to pay for our wedding.

About six months after our wedding we wanted to have our own space to start a family and instead of selling that house we kept it as an investment property to see what being a landlord would be like if we weren’t living in the house. That experiment led me to partner with some family members and purchase several more investment properties over the next few years. This gave me the opportunity to work for myself and have a little flexability with my schedule while my children were young.

The real estate market in the Orangeville area has out performed many financial markets over the last several years, as a result, many people are looking for ways to invest in real estate. I don’t know that becoming a landlord is right for everyone but if you already own your home or are considering purchasing your first home there are a couple of ways you can get started investing with your first property. 

Flipping

If you’re handy or have the money to spend on renovating a house you could consider buying a “fixer upper” and live in the home as you are renovating it. The idea here is that if you can purchase a property at an attractive enough price and make the right upgrades, you will be able to sell the property in the future for a profit then do it all over again.

While the flipping strategy can be very lucrative when done right, to often people think that what they see on HGTV is the norm and they will get the home at a great deal, only have to make some small upgrades and in a short amount of time there will be a fortune to be made. This unfortunately is more difficult then it seems on the surface. First it can be difficult to find properties that are selling at enough of a discount to market value to make this strategy practical.

Most first-time flippers end up going over budget with their costs and take longer to finish a project then originally planned. This combination can erase any potential profit that could have been made in this type of investment. Another trap that first time flippers fall into is focusing on upgrades and finishes that they like but do not necessarily appeal to the widest number of buyers, causing the costs of the project to escalate without adding value in the eyes of potential buyers.

Don’t let this discourage you just remember that you will need to find the right property at the right price and have a good plan coupled with the execution of that plan to be successful if you choose to begin flipping homes.

Become a Landlord

Another way to invest in real estate for a first-time buyer is to consider purchasing a property where you can rent a portion of the property. This could be a simple as renting a spare bedroom in your house. Alternatively, you can purchase a property with an accessory apartment or a multi unit property where you can live in one of the units and rent the others.

Being a landlord can be very rewarding but isn’t without its challenges. One major concern that many first-time landlords have is tenant selection. This can be intimidating as you will be finding someone to share your home with you. The best advice I can give with tenant selection is to go with your gut. You should check all references and credit scores but at the end of the day these are not clear-cut indicators of a tenant’s suitability. Over the years I have had great tenants with bad credit and bad tenants with great credit. At the end of the day trust your instincts, if you have a bad feeling about a potential tenant pass.

Another mistake I see first time landlords make is not having a plan for performing repairs and maintenance. Are you capable of making repairs yourself when the need arises? Will you have the time to make these repairs if you are currently working full time? To often new landlords don't realize that the need for repairs generally don't come up when it is most convenient for them, so have a plan in place for dealing with repairs especially if you have an already busy schedule.

I think that investing in real estate can be a one of the best investments a person can make but there are barriers to entry, both financial and psychological.  If you are thinking that investing in real estate can be the right way for you to achieve your financial goals, I’d love to have the opportunity to sit down and discuss investing in real estate in more detail.