Have you been considering buying an investment property in Toronto? It’s a big decision, and there are many factors to weigh depending on your goals. Here’s what you should think about before jumping in.
Financing your investment property
Financing is the first thing you should think about when considering buying an investment property—if you require a mortgage, it’s important to make sure you’re pre-approved for your purchase budget. Banks look at investment properties through a different lense than primary residences, so getting your pre-qualification in hand before you begin your search is smart.
Your financial goals
Once you’ve sorted out the financing, it’s time to have a chat with your accountant. You’ll want to make sure that buying an investment property works well in your overall financial plan. Are you able to make extra income from renting it out? What will the tax implications be when the time comes to sell?
Think about your goals and your timelines to determine if purchasing a property is a short or long-term plan. For example, if you plan to do renovations and sell the property in the short term (in six months to a year, or even in two years), then the location will be key.
The type of investment property to buy
One of the biggest decisions to make when you’re considering buying an investment property is what type of property to purchase, and in Toronto, the decision often comes down to whether to buy a house or a condominium.
While the benefit of a condo is that the maintenance can be easy and very hands off, the downside is that you will have to cover your maintenance fees, and that money is not returned when you sell. With a house you save on maintenance fees, but there can be a much greater need for renovations and ongoing upkeep.
The location of your property
Using your property as a long term investment is another option, especially if you rent it out. This is often a good way to augment your retirement down the road with stable monthly income, and finding great tenants may be easier than you think. However if you’re purchasing a property with the goal of renting it, make sure it’s in a desirable neighbourhood that will appeal to potential tenants.
These are just a few things to think about when you’re considering buying your first investment property. If you have questions, we’re experienced, knowledgeable and here to help.