Is purchasing a second residence one of your investment goals?
Realtor Dan Keeley, an agent with Royal LePage East Kootenay Realty, has worked with many people on investment property purchases in his 15-year career. Often, he says, explaining the process can help inspire people to take action. “There is a huge misconception that only the wealthy can afford to buy second and even third residences.”
He quotes political economist John Stuart Smith: “landlords grow rich in their sleep without working, risking or economizing.” Given the current market in Kimberley, it’s an accurate statement, Dan adds, with rental rates high, vacancy rates low and prices not skyrocketing the way they are in nearby Kootenay markets.
So what’s the first step?
To take advantage of such an opportunity, you need a plan, a down payment and strategies to protect your investment, Dan says. “If you’ve owned your home five years or longer, you may have the down payment already and not realize it.” Lenders in Canada will loan up to 80 per cent of the value of your home, he explains, which could provide $50,000, $100,000 or more for a down payment.
The numbers speak for themselves
Consider this: Current mortgage rates of 3.24 per cent translate to $347 per month in mortgage payment for every $100,000 borrowed. Dan says there are local homes for sale for $350,000 that could rent for $1,600 to $1,700 per month. Did you know that all or much of that rental income can help you qualify for a mortgage?
If you pulled $70,000 in equity from your current home, your could be paying as little as $975 a month for your mortgage, Dan says. “I also encourage my clients to have a minimum of five per cent of the purchase price set aside to cover emergency repairs and maintenance.”
Real estate a long-term investment
Returns may be low or non-existent today, Dan says, but over 20 to 30 years your rental property is being paid for by someone else. Historically, home prices here double every 25 years or less. Even if they stayed the same for 30 years, you could own $350,000 in real property free and clear, for only the cost of your initial investment and maintenance.
“I’m fairly confident that if you handed your banker $75,000 today, you would not be able to withdraw $350,000 in 30 years,” Dan says.
If you’d like to chat with him about rental property ideas, or learn about his property management or strata management services in Kimberley, call 250-581-6683 or email firstname.lastname@example.org or find him on Facebook.