In a recent poll more than 40% of Metro Vancouver residents said they’re planning on buying a rental investment as a retirement strategy. All indications are that those figures are similar in the Greater Victoria Region.
Are you considering buying your second home as an investment, or your retirement home? Buying another home in addition to your family home is second stage buying.
You’ve done it once before, so how different can it be? Much of what you learned as a first-time homebuyer will have shifted at this stage of the game. Ozzi Jurock consistently advises to invest in rental real estate (second stage real estate buying) for one of two reasons:
- to hedge against inflation
- a retirement investment plan
In today’s market it is more important than ever to emphasize positive cash flow. In order to do this you need to have a sufficient down payment. The challenge becomes making sure the rental income covers the mortgage and strata fees to ensure a positive cash flow when buying your second home.
5 Second Home Buying Considerations
1. Evaluate your long-term goals.
- Why are you looking at buying a second home? Be realistic. Will it fit your lifestyle:
- Are you looking for a vacation home? Do you have the resources and time to care for it and get to it for that matter (location)
- Is this strictly for investment purposes?
- Will it serve as a future retirement home?
2. Go for cash flow.
You need at least a 20% downpayment when buying your second home. Of course, the larger the down payment, the better the cash flow. Expenses include the mortgage, property taxes, insurance and strata fees.
3. Hire a real estate agent.
Real estate agents are experts in terms of negotiations, communities, and value. The agent will help you get to know the market and do most of the legwork for you. After that hire a property manager – they generally charge 10% of the rental income but will screen tenants, manage ongoing maintenance and take those midnight calls.
4. Get to know the area.
This is one area your real estate agent can really come in handy. They’ll have plenty information about the best areas to invest and attract good tenants: Schools, Universities, transportation hubs, amenities all play a significant factor in ease of renting a property.
5. Key point.
Buy for long-term passive income. focus on the quality and location of a rental property and put less emphasis on the market conditions. Ask yourself, “Will I be happy to own this property for the next 25 years?”
“Nothing beats real estate as a retirement play or a way to keep ahead of inflation.” – Ozzi Jurock
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