Real estate investing is a great strategy to grow your investment portfolio. There are two popular ways to invest in real estate: owning rental properties or fixing-and-flipping homes. Any way you choose to invest in Calgary real estate will require you to have a comfortable financial cushion to maintain any upfront and ongoing costs. Let’s look at some of the pros and cons of investing in real estate.
Investing in Calgary real estate will earn you equity and cash flow when done correctly. Investors profit off real estate by owning properties and renting them out. You will need to have supplementary finances if you want your investments to work out; your responsibility will be to keep up with maintenance costs, mortgage interest, etc.
Pros of rental properties:
Some of the expenses related to your rental property can be deducted from the rental income to decrease your tax liability. For example, the cost of replacing appliances or periodic maintenance can be deducted from your total rental income from the year to pay less tax on the income. Unfortunately, the assumption that mortgage payments are deductible is not the case. It is only the interest you spend on the tax-deductible mortgage. It’s always great to check with an accountant to ensure you take advantage of tax deductions and credits.
Cons of rental properties:
Any costs incurred in-between tenants will be yours to take care of, and these costs are typically the mortgage and utility payments. Finding the right tenant can sometimes be challenging, so you may have several months of incurring these costs. You will also spend time interviewing applicants, making reference calls, and verifying if they are the right fit to live in your home. Finding a long-term renter you trust with your property is ideal, but it is not always the case. Either way, the costs incurred during a tenant transition will fall on you, but owning and renting a property is a great way to invest if you can afford to take that on!
Over the last few years, buying a house to flip it has become super popular. Thanks to HGTV shows and DIY influencers, fix-and-flipping has taken the investment world by storm! This is a great way to invest in Calgary real estate if you are savvy in the real estate market, renovations, and design – and even better, it can be an enjoyable investment as well!
Pros of fixing-and-flipping:
Some people are passionate about renovations, design, and the flipping process. If you enjoy getting your hands dirty and getting creative, this can be such a fun process. Doing the tasks on the property every day is all part of the joy! The flipping concept requires you not to hold onto the property for too long, meaning the faster you can renovate, the quicker you earn a profit with the sale. The purpose is to sell the once-undervalued home for a favourable profit within about six months to a year, depending on how long renovations take.
Cons of fixing-and-flipping:
Buying an undervalued house and flipping it for a return is hard work. Renovating a home is no small feat and requires a lot of hands-on work, whether you are the one doing the renovations or not. You have to be around for check-ins, design choices, etc. You also have to move fast through the upgrades so that you aren’t responsible for the mortgage for too long. Finding cost-effective ways to renovate is another challenge in and of itself! If you find yourself not finishing renovations, your investment will very quickly turn sour. The upgrades and fix-ups need to be done well enough to make the profit you set out to make.
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If you’re looking for an investment property in Calgary or Edmonton, Realty Unleashed would love to help you. You can contact us here!