Grow Your Wealth as an Investor in Real Estate

Are you tired of slowly saving for retirement and wish there was a faster way to increase your savings? Learn how to become an investor in real estate and grow your wealth so that you can enjoy your money sooner than you expected. As a trusted real estate agent and addicted investor, I have helped people invest in the Ottawa market for over a decade.

To understand how to benefit from being an investor in real estate, you need to comprehend two parts: how to get started and how it can grow your wealth.

Part 1: How to Get Started as an Investor in Real Estate

Here are the top three steps to get started as an investor in real estate and start growing your wealth.

1. Define your Plan: Have a clear action plan so that going forward you can reach those goals. Consider various factors such as: types of properties that interest you, how to finance the purchase, timeline for having and holding the property, management of the property. .

2. Find Professionals: Surround yourself with professionals to help you with the process and gain valuable advice along the way. You will want to have a: mortgage broker, real estate agent, tax accountant, inspector and lawyer. Often, professionals have connections to other professionals in these fields so ask if you don’t know of one or prefer to have recommendations.

3. Determine Funding: There are several options to fund the purchase of an investment.

a) Cash

b) Borrow from Private Lenders

c) Partner to share the costs

d) Get a traditional loan from a bank

e) H.E.L.O.C. also known as a Home Equity Line of Credit To explain, I will share a story. If a person bought a home ten years ago and now it has gone up in value, they can apply through their bank to get a home equity line of credit. This allows them to borrow 80% of the home’s value and use that money to put as a down payment on another property. In reality, they are using the bank’s money as a down payment on the other property, therefore using very little of their own funds.

Part 2: How Having an Investment Property will Grow your Wealth

1. Appreciation: There are two types of appreciation: forced and natural. Forced appreciation is when you buy a property, complete renovations to it and therefore, increase the value of it. Natural appreciation is when the property increases in value over time. In Ottawa, the average home price increase per year is between 4-5%.

2. Cash Flow: This would be your monthly cash flow on the property. Calculate the costs of the property and figure out if it is positive or negative. If the rental income is cash flow positive, that could be a little bonus in your pocket each and every month.

3. Pay down: Each month a property is being tenanted, that tenant is paying down the mortgage resulting in a smaller mortgage for you to pay while you gain equity.

4. Leverage: Leverage allows you to use your investment property as security to purchase something else, such as: another property. Using your leverage can help you to increase your return on investment properties. For example, if a person owns one investment property and is thinking of buying another but, that person is unsure where to get the down payment. The buyer might consider using the current investment property as “leverage” to gain funds from the bank to use as a down payment on a second property.

Now that you know a little bit more about how to become an investor in real estate and how it can grow your wealth, have you thought about what to look for when buying an income property? Read my next blog on the top five things to look for when purchasing an investment property. If you're starting your research and would like a list of the average rental prices in specific areas of Ottawa, reach out to me and I'd be happy to provide that to you.