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Looking to Invest in the GTA? Here are some Tips!


First Time Investing in Real Estate?

Here Are Some Tips to Get Started:

1. Know Your Limits: Visit with a mortgage broker or your bank to determine how much money you can afford to borrow

2. Research Your Options: Look for properties that generate a positive cash flow. What this means is that the rent that you receive from tenants should be enough to pay your mortgage payment, property taxes, utilities and insurance bills. Budget an additional ten percent on your overall payments to pay for minor repairs that will invariably arise.

3. Hire An Experienced Realtor: Use an experienced local real estate agent who also invests in real estate themselves. Investors learn about the pitfalls only through first-hand experience, both good and bad, and you want that experience working for you as well. Realtors can also help you find tenants as well as creating clauses that online exactly what is expected from both parties.

4. Use a Home Inspector: Have any property inspected by a professional home inspector. In addition, find a contractor who you can trust to give you the right advice for any minor repairs or renovations that may be required, especially for older properties, in order to add the most value to your investment.

5. Keep Proper Records:  Do not mingle expenses or incomes these with your personal bank account as it will become difficult to properly trace this when you have to file a tax return at the end of the year.

6. Got a Partner? Create a Contract .If you are buying with a partner, make sure you have a proper partnership or joint venture agreement to protect both of you should things not work out as planned. In particular, provisions should be made if one of the partners wants to sell and the other one doesn’t, one partner is not paying their share of expenses or what happens if one of the partners dies.

7. Be careful not to buy and sell properties quickly. The Canada Revenue Agency may view this activity as business income. This means that you will have to pay tax on any profit you make on your investment. It is preferable to buy properties for the long term, rent them out and use your positive cash flow to reduce the amount of your mortgage owing, building equity in your property. If you then sell years later for a profit, it will likely be classified as a capital gain and thus one half of your gain will be tax free.

8. Not Working, Walk Away. Don’t be afraid to walk away if the deal does not work for you, no matter how much time you may have invested in the property.

 

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Posted: Wednesday, December 03, 2014 3:00 PM by Sutton Realty

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