I know it’s not something that we think when we’re tackling our student loans out of University or have to think about finding that perfect job that lets us grow and feel accomplished, but hear me out.
Purchasing an investment property is the best thing you can do for your finances after setting up your retirement plan. Yes, it has to be the best investment property, and they are tons of resources out there that will help you find out what type of landlord you’re ready to be. I tend to watch a ton of Income Property with Scott Mcgillvary on HGTV (I can’t help it- the man has amazing hair!).
Side note- I’m speaking at the same conference as Scott next weekend, and am beyond thrilled!
Investing in an income property is one of those that if set up correctly will pay for itself, and with minimum involvement from you, and will allow you to invest in other ones with the equality built in.
My biggest pet peeve in real estate investment is when people purchase homes outside their means, and find themselves in the house-poor category. There are some many ways to avoid that, and having an income property in your home is of the best ways.
One of the reasons I suggest saving up for an income property as soon as possible is that most of us are in a particularly frugal mindset when we aggressively try to pay off our student loans. Applying that same mentality to saving for a downpayment is relatively easy if you’re really motivated. There are tons of bonuses out there for first time homeowners, and you don’t need a huge down payment if it’s your first income property. One of the best ways to see if you’re ready for homeownership or are ready to invest in real estate is see if you debt-to-income ratio is less than 45%.
Am I saying that it’s easy to manage multiple properties in different cities? Hell no. We hire a management firm that takes care of most things so we don’t have to deal with the frantic calls from tenants.
Are we losing money if we hire a management firm? Kinda. I really suggest investing in properties that are cash flow positive even with the additional fees involved.
We all know that crazy hit that the real estate market took the last few years, so investing in property isn’t the first thing that people think of when they go to diversify their portfolios. I, personally, am all about building equity, and tend to look for properties outside the major cites. This is for multiple reasons, one of them being that I can’t actually afford to build a decent unit in Downtown Toronto, and still be able to aggressively pay it off.
One of the things that warms my heart is seeing families invest in real estate in towns where their kids go to school. Not only does it help pay for their child’s education during the 4-6 at University (if they do a post grad at the same school), but they make a decent chunk of change if they decide to sell the property afterwards.
The good news is that buying your second property is easier than your third, and your third is easier than your second.