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We're taking you behind the scenes and giving you the insider tools and powerful strategies to get ahead. If you’re a first-time homebuyer, you’ll find everything you need to secure your first property and start building wealth from day one.

If you’re an existing homeowner, this is where you take control. Maximize the wealth-building potential of your current home with proven strategies for refinancing, leveraging equity, and optimizing your mortgage for bigger opportunities.

Your mortgage is more than a loan—it’s a gateway to long-term financial success.

Our goal is simple: to equip you with the knowledge and tools to make smart, strategic decisions that will transform your financial future.

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7 Financial Tips for People Looking to Buy an Investment Property in Canada

July 19, 2024 | Posted by: Matt Broom-Hall

Investing in real estate can be a powerful way to build wealth, but it's essential to approach it with a well-thought-out strategy. Here are seven financial tips to help you purchase an investment property in Canada.

#1. Save for a Significant Down Payment

Investment properties in Canada typically require a larger down payment than primary residences. You will need at least 20-25% of the purchase price as a down payment. This is crucial to secure better mortgage terms and because properties with less than a 20% down payment require mortgage insurance, which adds to your costs.

#2. Understand Financing Options

Explore various financing options available for investment properties. Traditional mortgages, home equity lines of credit (HELOCs), and private loans are common routes. Each has its own set of requirements and benefits. For instance, while traditional mortgages might offer lower interest rates, they often come with stringent qualification criteria.

#3. Budget for All Expenses

Investment properties have expenses beyond mortgage payments. These include maintenance costs, property taxes, insurance, and potential property management fees. Budgeting for these is essential to ensure the property remains a profitable investment. Experts recommend setting aside at least 1% of the property's value annually for maintenance.

#4. Choose the Right Location

The location of your investment property significantly affects its profitability. Look for areas with high employment rates, low crime rates, and proximity to amenities such as schools, parks, and shopping centers. Emerging markets are famous for their affordability and growth potential.

#5. Calculate Your Margins

Before purchasing, perform a detailed analysis of potential returns. Key metrics include cash flow, cap rate, and cash-on-cash return. Ensure you understand the 1% rule, which suggests your monthly rent should be at least 1% of the property's purchase price. This helps maintain a positive cash flow and secure profitability.

#6. Plan for Unexpected Costs

Prepare financially for unexpected events, such as tenant vacancies or significant repairs. Set aside a portion of your monthly rental income to cover these unforeseen expenses. This buffer will help you manage any financial surprises without impacting your overall investment strategy.

#7. Conduct Thorough Legal Due Diligence

Understanding your legal responsibilities as a landlord is crucial. Ensure the property complies with local regulations. Be aware of tenant protection laws that could affect your ability to manage the property effectively. Conducting a home inspection and reviewing the title deeds will help you avoid legal issues.

By following these tips, you can better navigate the complexities of buying an investment property in Canada and set yourself up for long-term success in the real estate market.

Creating happy homeowners by providing personal bespoke mortgages solutions with uncompromising service.

Matt Broom-Hall
Mortgage Broker & Coach
matt@hellomortgage.ca

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