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Jordan and I are thinking about investing in a second property. We are at a place in our lives where we want our money to start working for us, instead of only working for our money. There are a lot of options for investment, including buying shares where I work, the stock market, RRSPs/TSFAs, real estate ect.
One of our considerations when making this decision is our future, and not just retirement future. Jordan has an illness that may (or may not) prevent him from working full time to 65 – he may have to take a step back from things, and we don’t really know when that will happen. Starting to invest in property now, means we may be able to create a job (property manager) and an income stream for him outside of the traditional 6am-6pm environment that he’s in now.
Buying shares at my work is a very good investment, and we do have quite a bit of $ there – and will likely continue to do so albeit on a smaller scale (diversity is always good right?) but this is money we won’t have access to until I leave the company (hopefully when I retire in my 60’s).
We haven’t made a decision yet, but are going to start doing some serious research. Steps we’ve started on include:
- Rental market research where we live
- General demographic research (what types of people are renting)
- Real estate market research (will the property increase in value over time)
- What type of property : Condo, Townhouse, a Home that could be split (top and bottom rental)
- Affordability
- How much can we invest?
- Do we need a partner?
- What would the BEP be
- Our mortgage broker from our home
- She has several rental properties in a neighboring city and is currently running a mock up application for us including what we would need in rental income with some assumptions on our investment that I’ve given her
- A colleague/Mentor
- One of my mentor’s has an established set of properties that she and her husband manage in a neighboring city
- I have had an initial conversation with her and have set up a coffee date once some of our other research is complete
- She also invests in stocks and has well rounded advise to give
- My Mom
- She’s a smart lady, and knows her stuff
- She ran her own business for upwards of 25 years with my dad
Please, ask questions, and challenge us – I want to make sure we think about everything we can before diving in.
Are you able to finance all of it? Here in the States, you need at least 20% to buy a rental property and need to qualify based on you current income and debt load without the future rent projection. How does it work in Canada?
ReplyDeleteHi ND Chic,
DeleteWe would also need 20% down to buy a rental property and also need to qualify based on current income and debt load. That's the same in Canada :) We have the qualification part down easy (income to debt), it's the downpayment that we would need to start working on.
I think having a rental property a great goal to work towards, especially given Jordan's medical issues. But if it was me, I would do a few things before jumping in:
ReplyDelete-pay off the car - it's still quite a heavy loan to have and once that is paid off, you'll have more disposable income.
- get your emergency fund and/or house fund (for your own home) up to a higher level.
- start saving in a separate house fund for the potential income property. This is as important as the down payment, especially considering you won't be living in it and who knows what the tenants might do. (Someone I know has two rental properties and one of them was trashed by the tenant. She was able to get some money back from insurance, but they had to take out a sizeable loan to repair the damage and get it liveable again. During that time they also had to continue paying the mortgage.)
Good luck!
Thanks for the great advice Lea!
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