The Initial Property For Your Investment Portfolio.
If you're considering investing in real estate or expanding your property portfolio, you may be put off by the homes available within a first-time home buyer's budget. We spoke with John Haddad, a real estate agent from New Purveyors, to learn about setting realistic expectations for your first property and why a fixer-upper or outdated home may be an excellent starting point.
It's crucial to have realistic goals and expectations, particularly when entering the real estate market and building your portfolio. Your first home doesn't have to be a luxurious apartment with marble floors and granite countertops. Instead, it's perfectly acceptable to find a place that you can live in and renovate over time to add your own personal touch. Not only are you building equity in your home by doing so, but more importantly, you’re getting into the market at today's prices. Chances are that the same condo you buy today will not be the same price 1, 2 or 3 years later. Real estate agents often say “Yesterday’s price is not today’s price," and what this means is that prices, historically, are always rising. Entering the market sooner is typically a better call than waiting, especially if your plans are to invest in multiple properties.
What is Equity?
Home equity is the difference between the value of your home and how much you owe on your mortgage. For example, if your home is worth $400,000 and you owe $100,000 on your mortgage, you would have $300,000 in home equity. A good way to build equity in your home is by doing some renovations to increase the value of the home. Renovating your kitchen, making it more modern and stylish, is a great way to increase the value of your home. The kitchen is the heart of the home, after all, so you’ll find plenty of value in having a newer, more useful kitchen.
Bathroom renovations can also go a long way as many buyers are attracted to newer and modern bathrooms in homes. These upgrades increase the market value of your home, which increases its equity.
Don't forget the curb appeal and back yard of the house, some minor landscaping in the front and back could mean the difference between your home selling faster or sitting on the market for weeks or months. All of this is important in building value in your home!
Getting Into The Market Early!
We’ve all heard stories about how homes in the 80s, 90s and 2000s were selling for 50K, 100K, and 300K compared to now, where they're selling for 4x, 5x or even 10x the amount they were bought for. This is exactly the benefit of getting into the market early, the key here is to just get into the game rather than worrying about aesthetics or finishes, especially if it's your first home! Homes in Ottawa in 2018 were selling on average for $395,506, fast forward 5 years later the average is now $767,508. That's a 33.3% increase in 5 years.
If you’re interested in building a real estate portfolio, chances are you will be selling this home in a couple of years, or at least upgrading the home to be more suitable.
Because of this, what’s most important is to focus on the location of the home and deal with the interior looks of the property slowly as you occupy it.
Easy upgrades you can make if purchasing an older home would be replacing carpet with laminate or hardwood floors. Minor changes to kitchens in older homes would be countertops or cabinets and depending on how old the home is sometimes the ceiling of the kitchen can be changed to accommodate a more modern look with spotlights.
