Real estate as a money-making investment with Taylor Bennett
OTTAWA -- Getting into the Ottawa Real Estate market has been a bit like being a contestant on ‘The Amazing Race’; you need stamina, a strong stomach, and a good team.
We all know someone who has been in the multiple offer, bidding war, paying-well-over-asking scenario.
That may lead an investor, someone looking for a real estate purchase to generate income, to believe the Ottawa market is overvalued.
Taylor Bennett, a broker with Bennett Property Shop realty, spends a lot of his time educating buyers on real estate values in the nation’s capital, and he explains the recent spike of 20 per cent growth is a market playing catch up.
“When you look at the annual growth over the last 10 years, the Ottawa market looks to be making up for a five-year span when the growth was under three per cent,” says Bennett.
“While the Ottawa market won't continue to grow at the current 20 per cent rate, even Ottawa's average growth of 6.7 per cent makes the local real estate market a solid and secure investment option.”
Bennett is a regular contributor on CTV’s News at Noon and regularly hosts "The Bennett Real Estate and Wealth Show" on Newstalk 580 CFRA.
“Investing your money into anything can be risky: stocks, start-up, mutual funds,” explains Bennett.
He says that Ottawa has proven to be “one of the most reliable real estate markets in North America supported by an extremely predictable and stable economy.”
“This stability makes the local real estate markets an excellent option when it comes to investing your money.”
Bennett says investors need advice, the right plan, an understanding of the market, knowledge of costs, a sense of expectations and risk tolerance. He’s prepared these tips to help:
Last 10 Years in Ottawa
Average Annual Price Growth:
- 2011 5.0%
- 2012 2.4%
- 2013 1.6%
- 2014 1.2%
- 2015 1.6%
- 2016 1.2%
- 2017 5.5%
- 2018 3.8%
- 2019 8.4%
- 2020 19.9%
10-Year Average = 5.3%
65-Year Average = 6.7%
Investing Made S.I.M.P.L.E.
S - Seek expert advice
I - Identify your goals
M - Money
P - Property type
L - Level-headed approach
E - Exit strategy
Seek Expert Advice
- Real estate advisor
- Tax accountant
- Mortgage specialist
“To make the best choices, you need the best information and advice. It may seem obvious but before you start making any concrete plans be sure to seek out experts or people who have successfully invested in real estate to get advice based on real-life experience. While it may be tempting to get your info from an online blog or article, everyone starts in a different position, and each investment plan should be personalized based on the individual. Everyone has a different tolerance for risk, different finances, and different goals.”
Identify Your Goals
- Increase monthly cash flow
- Equity growth
- Subsidize income
“Defining what it is you want to achieve from the start is essential. If you don't know where you want to be, how will you know how to get there? Identifying your main goal allows for the rest of the plan to fall into place. This will help narrow down potential properties, target specific neighbourhoods or areas, etc."
Money: How Much Will You Need?
- Initial down payment
- Property improvements
- Vacancy, advertising, etc.
“As cliché as it is, you need to spend money to make money, but it's a cliché for a reason: it's true. Investing in real estate can be costly but not all investments require the same up-front costs. At minimum, the vast majority of real estate investments require a 20 per cent down payment. The most common ways of funding this down payment are from savings, a loan, an inheritance, or a HELOC (home equity line of credit).”
- Muli-Unit Dwelling
- Residential or Condo
“Different styles, and types of properties, will help deliver certain investment goals, and each comes with its own level of risk, upkeep, upfront & on-going costs. Once you have defined your goals and finalized your finances, narrowing down the styles of properties becomes far easier.”
- Put the emotions aside
- Let the numbers decide
“Many first-time investors often apply the same approach they took when they bought their personal residence, which is a highly emotional decision. The same approach isn't effective when it comes to investing. Your personal tastes or preferred style of home aren't important when buying an investment property. Not only is it vital to stay within your financial means, reminding yourself that you're not the 'end user' can help make the decision easier.”
- When to sell?
- Additional taxes?
- Identifying opportunity costs
“Investing in real estate should be planned as a long-term investment, but there comes a time to sell and move on to the next. Having a set timeframe is important, but assessing your investment should be an on-going task to not only ensure the investment plan is progressing but to help identify other opportunity costs in the market.”
“Along with identifying the correct time to sell, savvy investors should also have a firm grasp of the costs of selling: additional taxes, capital gains tax, real estate or legal fees, etc.”