ARE INVESTMENT PROPERTIES WORTH IT?

By: Derek Ladouceur

ARE INVESTMENT PROPERTIES WORTH IT?

Tags: ARE INVESTMENT PROPERTIES WORTH IT?

You would think that’s an easy question with an easy answer but it’s not.

Yes, we know that property values have continued to rise year over year and I believe that they will continue to do so. Yes, there will be slowdowns and even a stalling of sorts, but a property you buy today I truly believe will continue to go up in value.

So that’s it then? Easy answer? Just buy a property? Well no. You still need to find tenants, you still need to be able to bankroll your investment property should there be repairs or god forbid you do not find a tenant for a couple months.

I think the question you have to answer is, Is an investment property a good investment for you? Can you handle the risk that is associated with an investment property?

If you can handle some of these issues that I am going to lay out for you then you may want to consider looking into an investment property.

The first thing is if you are expecting to buy a property, rent it out and start making money from day one then stop there. Home prices are rising as are condo prices. Anything you buy right now you can probably expect to lose money on a monthly basis with the rent you are taking in.

Couple that with repairs you may have and maintenance you will undoubtedly have and you are in the red.

BUT as you hold that property your mortgage amount continues to drop while the rent you take in stays the same or goes up. Again though that takes time.

Also what happens if you have tenants that move out and you cannot rent it out for a few months? I know that sounds bizarre right now with the vacancy rate so low but it is a factor.

Do you have the money put aside that will take care of those bills?

Then there is the dreaded tenant from hell. What happens if your tenant decides to stop paying rent? What happens if they lose their job and say sorry I can no longer pay you until I find a job again? Yes, you can try and evict them for non-payment but that will take time. In the meantime, your mortgage still needs to be paid as do property taxes and any repairs to the property.

I have a client who has bought 8 investment properties with me and he once said you need to pick your tenants like you pick your friends. Not sure if that is 100% possible, but I get where he is coming from.

I know I make it sound dreary and you may think I am trying to turn you off from buying an investment property. Believe me, I am not.

But I am also not going to blow smoke up your ass and make it sound like its all sunshine and roses. I just want you to understand some of the pitfalls you may encounter when looking into an investment property.

The same client I mentioned earlier has experienced all sorts of setbacks form buying investment properties.

He knew the risks going in but it still made sense for him and he now has 4 of his properties paid off in full and tenants in all his properties paying rent.

Long term, investment properties are great, and they can be a great source of extra income to you and your family.

Just keep in mind that with long term gains there will undoubtedly by short term headaches and hiccups along the way.

Cheers!

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