Why Buy An Income Property?
It grows at greater rate than a traditional investment.
It grows at greater rate than a traditional investment. Historically, the benefit of having real estate assets in your portfolio is clearly evident from the returns of such assets compared to other capital-gain instruments such as stocks, bonds or foreign equities.
Anyone can do it.
No matter your status in life – married, single, employed, retired – you can own and manage an income property with minimum time investment. On average, clients say they spend approximately 8-12 hours per month looking after their income property.
Generates Multiple Incomes.
a) Third party mortgage payments (Debt Reduction)
When the right factors are present (numbers, location and good structure) the mortgage is being paid by someone else, not you. In many situations the rental income goes beyond paying the bills and actually generates positive cash flow.
b) Increased property value (Wealth Accumulation)
Just as with a single-family home, your income property increases in value over time. Unlike a single-family home, your return on investment (ROI) is greater because of the added bonus of not paying for most, or all, of your mortgage. Moreover, if the property is in a high-demand, central location – one of the key factors to achieving the best ROI – even more value is gained.
c) Land supply vs. demand (Wealth Accumulation)
In a city like Toronto the land in the core is scarce, but the populace continues to grow. Thus, core land becomes a limited commodity and grows in demand. As the demand for land increases in areas where there is a great density of people, the price for land goes up, as well as the value.
Steve was looking for an investment that would yield a higher return on investment (ROI) than the traditional financial products his bank was offering. He had heard about the pros of owning an income property and was intrigued, but he had some concerns. As a small business owner, Steve had little time in the day, and was wary about how much time managing an income property would take. He had also never been a landlord before, and the prospect seemed daunting.
Phil worked with Steve to find him an income property that met all his criteria, and was suitable for a first-time landlord. Although it took a few months, they eventually found a well-built, well-maintained property in a sought-after area that would attract the right kind of renters. Not only did the property generate a positive cash flow immediately, it came complete with great existing tenants, some of whom are still living in the property today. Phil helped set Steve up as a landlord, put him in touch with other income property owners and their networks, and coached him every step of the way on how to run a successful income property. He even ran his first open house.
More than two years later, the property is still generating positive cash flow, and while it is not a passive investment, running it has not taken nearly as much time as Steve had imagined it might. Phil still advises Steve when needed, and Steve is considering buying a second income property to further grow his portfolio.