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Some home purchases improve how you live, not where you live. Matt’s clients couldn’t agree more.
Of all the types of clients BREL agent Matt has helped over the last ten years, his absolute favourite thing to do is assist clients in purchasing their first investment property. He takes the same care he would if he was searching for his own income property – he put himself in the buyer’s seat to ensure he left no stone or tactic unturned.
Helping someone increase their future wealth potential or retirement income makes all the hard work of finding an income property worthwhile. Think you can’t afford a second property? You might be surprised.
Here’s Matt’s Income Property Story:
Making something out of something.
Matt’s clients were very fortunate. They already owned a home and had paid down a considerable chunk of their mortgage. They also had some savings and thought, perhaps they could use those funds to buy a second property for income. They knew there were in a position to leverage that equity for a second mortgage but didn’t know just how to do it or if it made good financial sense.
It needed to work for dollars and common sense.
The client that Matt was working with knew precisely what he wanted. Having run the numbers, it was clear the purchase weighed heavily on their everyday financials. The property would need to carry itself as soon as possible if this was going to work. It was essential to find something that was “turn-key” and ready to rent. Matt knew, with the right property, they might be able to leverage the funds from the bank for the mortgage…and maybe more.
All in due time.
The one thing that is important to know, and often hard to grasp, is your investment property doesn’t need to be where you’d like to live. It needs to be where the tenants are – and in particular, the ones willing to pay the rent you need. Some financial calculations are critical in determining if a property will deliver on your investment. Often, this means purchasing in an area that is not selling at top dollar. For the buyers in this story, targeting areas outside the Toronto core was just the ticket. Matt searched far and wide and set his sights on a property in Oshawa. The numbers worked. It was turn-key move-in ready. AND there was already one tenant in place. Bingo!
Finding the one
The home they found was a fully renovated Bungalow with two separate units. There was one main-level, 2-bedroom unit and a spacious 1-bedroom basement unit that had fantastic ceiling height as well as a side exit and rear exit. It was a turn-key property in excellent condition with a fully detached garage. Even better, the basement unit was already tenanted with a gold star tenant. The only blip? The tenants upstairs were leaving the week the clients were taking possession. This timing didn’t leave much wiggle room.
Driving to a successful outcome
Matt knew that getting the main floor apartment rented before closing would be ideal. No stranger to property management, he knew the right tenant was out there. He made countless road trips out to Oshawa to help with the purchase, market the property for lease and vet a fantastic new tenant who is now paying $350 more per month than the last tenant. All before his client took possession!
Why does Matt feel this approach was worth every minute (and kilometre)? “We were able to advertise it for rent before the closing and secure a new tenant by the time they took possession of the property – without losing a single month of income. This whole experience was a real accomplishment for my clients. Having the idea, the will to take the plunge and be so successful with a cash flow positive purchase has motivated them to start thinking of their next income property.”
Tips for Toronto Investors
If you are considering taking the plunge into an investment property, here are Matt’s tips:
1 – Choose the right partners:
With first-time investment buyer clients, I recognize that this is a relatively new idea. Education is key. It’s important to start from the beginning of the process so they can learn what is involved in a purchase like this. My approach is to guide clients through each step. I believe they need to feel comfortable and ready with every tool they will need to ensure they understand what they are doing. And they need to understand what being a landlord involves.
2 – Crunch the numbers, then crunch them again:
With this client, the goal was to leverage as much as financing as possible from the bank. We used the BREL Investment Calculator to get a solid understanding of the costs to buy, the potential revenue and the ongoing costs.
3. Find the right property for your investment needs, not your personal taste:
This home was in pristine condition and so well cared for by its owner and tenants, which made the decision easy. The 40-minute drive from their principal residence was doable for property management; they were able to secure the home below the asking price and get more rent than the previous owner. Don’t rush your search, or settle. The last thing you want is to find yourself with an investment that doesn’t deliver.
You can read our complete Guide for Toronto Investors here.
