The vast majority of Canadians hope to own their own home and it is likely the largest investment you will ever make. Buying a property is a serious thing and getting it right is essential for your lifestyle aspirations as well as your pocket. While renting can be a great short term solution, investing in your own home is always going to be a sounder long term proposition.
But home ownership isn’t the only way to invest in property. You could buy to let or find a fixer-upper to flip and make a faster profit. If you have a place to live already, flipping houses can be a good way to invest and grow your money on the side but equally, first-time buyers should consider the potential of doing up a property while they live there in order to get a foot on the property ladder and work their way up.
But the big question is, when should you invest in a property?
When You Have a Deposit Together
Getting a deposit together is the biggest challenge young people face today. Saving enough money is a monumental task but there are a wide variety of things you can do such as taking on extra work, set up a side hustle and work out where you can save the most.
It takes most people a few years to get a deposit together so try to be patient. However tempting it might be to spend, remember that even a few cents here and there make a difference in the long term. The more you can put aside, the faster your deposit will grow. Plus, once you’re in the saving mindset, you’ll probably find it a lot easier to work out where the most valuable savings can be made and what you really need to live on.
One thing you must remember though: your deposit is all going to go towards securing a mortgage. This means that you also need to save for the extra costs like solicitors fees, a moving van and furniture. Make sure that you write down a comprehensive list of all the different fees and charges you need to be aware of so that you can save separately for those things too.
When You Have an Affordable Mortgage in Place
The mortgage market is highly competitive and mortgage brokers often have a wide range of deals in place. Doing your research here is absolutely essential because while a deal might look good up front, there could be hidden costs or risks later down the line. A company like Altrua is a good port of call for first-time buyers as they offer a ‘fine print education’ service to talk new buyers through all the fine print and provide advice on what to watch out for.
When you agree a mortgage, you must look at the monthly costs to make sure that you can afford it. There are a few different types of mortgages with different interest rates and repayment periods. Compare and contrast a few before settling on the one for you. For example, an interest-only mortgage can be a good option for first-time buyers as it offers lower monthly payments for a period of time before the price goes up later on. This can be more expensive in the long term but is a good way to get onto the property ladder.
It’s really important to stress that while a mortgage provider may be able to provide a larger mortgage than you anticipated, this is not a good moment to stretch yourself. It’s very easy to be tempted into a higher mortgage since more expensive properties are often more appealing. However, staying well within your budget and getting a good deal will give you much greater financial security in the future.
If You are Willing to Do Home Improvements
First-time buyers and property investors can both really benefit from buying a fixer-upper property. While there are definitely some home improvements that require a professional such as electrics, you can add a surprising amount of value with some smart investment.
One surprising home improvement that adds value is replacing your garage door. This improves to the curb appeal of your property and increases the security too. Combine this with some work in your garden such as a few pots of flowers and a well-maintained lawn and you could see a real uptake in interest in your property.
The kitchen and bathroom are also good areas to make improvements. Simple things like painting or replacing cabinet doors can make a huge cosmetic difference as can giving everywhere a really good clean. Bleaching grouting is a good way to remove any mildew stains and will make any tiles look much better too.
When you are looking at a fixer-upper, you should always make sure that you aren’t taking too much on. The best fixer-uppers are those that require a little more than TLC but don’t have any structural problems to fix. For example, a house that belonged to an elderly person might need a significant overhaul to bring it up to date which would add value. A house with subsidence or any other structural problem is only likely to cost you a fortune in fixing up as more problems are likely to appear later on.
You should always have a professional survey done before you buy any property to check for potential future problems. Another good tip is to take out a mortgage that covers the value of your planned works as well as the house. Borrowing a little more like this is a good way to fund the improvements you want to make and as long as you sell quickly and for a profit, shouldn’t cost a lot more. As ever, do the math first!
When You Want to Put Down Roots
It is natural for people to want to put down roots and buying a property will certainly tie you to a place for a reasonably long time. Of course, you can always move on, but when you are buying a property, you should be thinking with your 5 year plan (at least) in mind.
When you are choosing the perfect property, it’s important that you think about what sort of lifestyle you want to lead before you look into the location. A young professional, for example, might want to find a place in the city to be close to nightlife and have fun whereas a young family or a couple wanting to start a family might prefer something in the suburbs. While you can do a lot to improve a property, the only thing you can’t do is pick it up and move it. This is why location must be a priority from the start.
If you are looking for an investment property such as a buy to let, you might also like to consider up and coming areas. These are areas that are undergoing improvement and drawing in more young professionals in particular. Buying here gives your property a chance to increase in value over time, not just with your home improvements.
When You Have Cash to Invest
A property investment is a good idea if you are looking for a long term investment and you have enough cash to do it. Buying to let is a great way to gain an asset as long as the rent you earn covers your mortgage and any other fees. This way, your investment will earn you money while maintaining its value.
However, don’t assume that this will be a hands-off investment. You will need to maintain your property over time to keep and potentially increase its value. You should also bear in mind that you will need to be on hand for any issues your tenants may have or you will have to hire a property agent to take care of it for you.
If you are planning to build up a property portfolio, you should definitely start small and work from there. Buying a fixer-upper, doing some improvements and then renting it out is a good start as this will give you a feel for the property market and you can always sell for a profit if you change your mind. As before, you should think carefully about the kind of location you want and the type of person who will likely be interested in your property. Don’t buy a one-bed flat if your ideal tenants would be a family!
Investing in property is a big step, whether you are buying your first home or you are beginning an investment portfolio. The most important thing is that you do plenty of research before deciding on anything – from working out what your budget should be to figuring out how much you will need to furnish your property. This is a big step so while the property market can move quickly, you must take your time preparing before you snap up the perfect place for you.