Five Ways to Make Money with an Investment Property
There are many types of real estate investors that use many different strategies to obtain a great return on their investment. Some may be more experienced or savvy investors willing to take on more risk than others, while some may be more risk averse. The buy and hold strategy is one of those strategies that reaps great reward with less risk than others.
Below are several ways that one can earn money with Investing in Real Estate using this strategy:
- Passive Appreciation
This is probably the most important and the most return you will receive on the investment. A property over time will appreciate in value. Depending on the area or city you live in, the numbers may fluctuate year over year, however in the GTA we are seeing anywhere from 7-10% on average per year. - Principal Paydown
As a landlord, you buy a property, and have someone else pay the mortgage. What a great concept. The rent you receive pays your mortgage, where the principal amount you owe to the bank will decrease over time. - Cashflow
Hopefully all the rent you receive covers all your expenses such as mortgage payment, property tax, house insurance, maintenance fees, etc. Once all these payments are taken care of, the remaining balance is the icing on the cake and cash in your pocket. - Forced Appreciation
This involves renovating the property and therefore increasing the property value. This type of appreciation can increase the value of your house two or 3 times the cost of the reno. Updating your kitchen, washrooms, flooring, etc. are all major renovations that can increase the value of your home, however smaller renos around the house can also help. - Tax Benefits
When purchasing a rental property, there are many expenses that can be deducted against your rental income: Capital expenses and Current Expenses. These deductions include: depreciation, insurance, interest on loans, legal & accounting fees, management fees, repairs & maintenance, property taxes, utilities, renovations, transportation to property, and many more. We always recommend speaking to an experienced accountant in this field to maximize the benefits.
For more information on how an investment property can benefit your portfolio, Team Bhavsar is always available to discuss.
Why Kitchener/Waterloo is a Great Place to Buy Real estate
Some Quick Facts about the Region:
1. Cheaper to Buy a Home
It is much less costly to buy a home in the Kitchener-Waterloo area vs the GTA and surrounding suburbs. Properties we seek out in Kitchener are as much as 25-40% cheaper.
2. A Growing Population and Year-over-Year GDP Growth
Kitchener-Waterloo is one of the fastest-growing metropolitan areas in Canada. (Remember when Milton was just getting noticed in the late 2000’s and rapidly growing, well it’s now a tougher area to invest in due to the higher prices).
3. High Rental Rates
Kitchener Rental Rates were the fastest growing rates in Canada that soared between 10-17% depending on the unit size. This steady growth continues in 2020.
4. Low Vacancy Rate
The region has one of the lowest vacancy rates in the country for 3 bedroom homes at around 1.3% as well as low tenant turnover rates.
5. Higher Quality Tenants
In a large tech eco-system, Kitchener offers more AAA tenants. With COVID-19, more and more of these white-collar employees are working from home. They are seeking out larger dwellings outside of the GTA for more space. The main key fears landlords have are payment delinquencies and damage to their property. However, with the tenant quality of professionals we are renting to, we are seeing more and more high income/skilled tenants with greater job security.
6. Innovation
There is access to world-class facilities that foster technological, artistic and cultural advances as well as Top Educational Institutes such as University of Waterloo, Laurier University and Conestoga College, amongst many more. A large percentage of these graduates tend to stay in the region due to employment opportunities.
7. Silicon Valley North
Kitchener-Waterloo has been dubbed Silicon Valley North, as it has the highest density of tech start-ups in Canada, and the second-highest in the world. Google, Shopify, D2L, Christie Digital, Vidyard, Thalmic Labs, OpenText, Miovision, Communitech, and Square are just a few of the global tech giants that call Kitchener-Waterloo home.
8. Investment in Infrastructure
Kitchener-Waterloo has recently seen major improvements in transportation infrastructure, including the completion of the iON LRT. Further, the minister of transportation has confirmed that two-way, all-day GO trains between Kitchener and Toronto will be a reality before 2024.
Population growth, employment opportunities, business development, and infrastructure expansion all play a key role in the continuing advancement of this city. The region is growing rapidly and is definitely a great opportunity for investors.
