Buying a property as an investment is not like buying a home, and if you think that your first investment will be easy because you've owned a home before, think again. You'll need to look at a whole other set of factors and metrics and focus on making a positive return on your investment first and foremost. You also cannot afford to go wrong when valuing commercial property, since you won't have the satisfaction of being able to live in it as you would with your home.
This is why you have to be very careful with that first investment, as it could dictate the trajectory of your whole career. Let’s take a look at a few things you need to know before you buy your first investment property.
One of the most important things to check when looking at investment properties is trends in the market. You should first look for a Canada Real Estate Market Forecast as it will inform you about things like interest rate trends and whether the province you are thinking of buying the property in is an up or downtrend. This will also allow you to gauge the health of the market in general and will help inform your decisions.
You then need to look at the trends in the specific area the property is located in. Has there been a demographic influx there, or have major infrastructure projects been announced? Is there a major commercial development near, and did a major company decide to expand its operation in the area? How about crime, and, in the case of commercial property, are there many other lots like yours in the area? These are all things that will allow you to tell the true value of a property and if it's a good deal.
Speaking of valuation, you should get familiar with the 1% rule if you want to get an idea at a glance of whether a property is worth considering. The rule dictates that a property needs to bring at least 1% of the price the owner paid in revenue per month to be worth it. So, if you bought a property for $350,000 and added $30,000 in renovations, then the building has to bring in $3800 per month to be considered a good deal.
If you haven’t thought about buying a piece of land and developing it, you should do so. There is lots of land available all around the country, and you could find much better opportunities for profit if you went that way. Some people will buy commercial property, tear it down, and replace it with multi-door condo units instead, for instance. These lots can include old buildings that are not up to standard anymore or small businesses like gas stations. So, don't be narrow-minded, and consider alternative investment options as well.
These are all tips that should help you identify good properties for investment and make good decisions. Take the time to study the business and your market before you make your first move, work with reputable people, and have a clear road map for your future if you want to increase your chances for long-term success.