There are so many people who want to make it rich in real estate. They've either read books like Rich Dad, Poor Dad or they’ve taken an inspiring course on making it rich quick. In the midst of all this excitement, people often don't realize the amount of work, time, and the resources involved in being a successful real estate investor.
A lot of these courses are targeted to the U.S. and parts of Canada where the market and laws are different. Quebec has a rent control system in place and is governed by the Civil Code. This makes it more challenging to find great deals. Landlords can only raise rents by a certain percentage annually so rents tend to not keep up with market prices. It’s important to know the local laws and market before you start.
Can you be successful?
You need to know how to recognize a good deal when you see one. The key is to focus on one or two investing strategies so you can build experience and knowledge. Good deals sell fast so you need to be able to make decisions fast.
Here is a list of the main real estate investing strategies:
Buy and Hold
This is the most popular, low risk way to invest in real estate. You can take your time improving the building's value. Long-term, it could be part of your retirement portfolio. You can remortgage and withdraw equity to reuse for other real estate investments. When you withdraw equity, you won’t be penalized on your income tax until you sell. There are long-term tax benefits as well. You can have business deductions and write off your mortgage interest. Consult with your accountant.
Buy, renovate, and rent out
There is great potential here because you add equity rather than paying top dollar for something that is already fully renovated. Once you’ve added value to the property, you can remortgage, take out the equity, and purchase another property. Keep in mind that if you’re working with a single house or apartment, you run the risk of having only one rent covering all your expenses in comparison to a duplex or triplex.
Buy a multi-door building and turn the basement into an apartment
This strategy adds immediate value because you improve the building’s equity and cash flow. You can either hold this property or flip it depending on your real estate goals.
This strategy is much higher risk and requires much more knowledge. People who flip properties buy the building short-term to improve its value and then re-sell as soon as possible. To do this, you must have knowledge of the market, a grasp on how to renovate a property, and you must understand all of the costs involved in holding a property.
Turn apartments into condos
Although this strategy has potential for great returns, it’s important to note that there has been a downturn in the condo market since 2016. To protect your investment, make sure you are creating condos with the location and features that the majority of buyers in today’s market have on their checklists.
Rent to own
This business model has become more popular over the past five years. This method opens the market to buyers who have the money for a downpayment but are not able to get a conventional mortgage. The rent-to-own company purchases the home for them. The Lessee pays for the mortgage, maintenance, and any renovations. After an agreed upon timeline, the Lessee has built up their credit and can apply for a conventional mortgage to buy the property from the rent-to-own company.
Wholesale or contract assignment
This is where you have an accepted promise to purchase for a property and you then resell it to someone else. In Quebec, you must have the seller’s permission to do this. The benefit of this strategy is the quick turnaround time however you need a good database of investors who are ready to buy.
These are the most popular real estate investment strategies out there today. Regardless of your approach, it’s important to keep in mind that becoming a real estate investor takes knowledge and a good plan of action. Courses, mentoring, and continuous research are valuable. But the best training is getting out there to visit properties, crunch the numbers, and develop relationships with suppliers. Real estate brokers, mortgage brokers, inspectors, notaries, and tradesmen are just a few that will prove themselves invaluable to your business.
Jennifer Lynn Walker has been active in Montreal Real Estate since 2003. She founded the Montreal Real Estate Investor’s Group, which has more than 1,100 members. She specializes in buying and selling, ecofriendly homes, and in helping real estate investors. For more articles and e-books visit her online at: http://www.montreal-realestate.ca