How do I get started with real estate investing?

By Scott Moore, Realtor

Owning real estate is one of the most accessible ways normal people can build wealth. We see this year after year all over the world – regular people buy a home, usually with a mortgage, and over time, the mortgage gets paid down while the value of the real estate increases.

After years of ownership, when you take a step back to look at the equity you’ve built, and the current value of homes, you’ll wish you would have bought more! This is a normal reaction and I’ve even said it myself many times: why didn’t I buy more housing and rent it out years ago???? 

The best news is that it’s never too late!!

How to invest in real estate to generate income?

There are lots of different ways to use real estate investing to build wealth but buying a property and renting it is one of the simplest and most common ways. Winnipeg is continuing to grow and as we see the housing costs rising, more and more people are renting homes. Whether it’s a small condo, attached homes or stand-alone houses, good rental properties are needed more than ever. 

How do I get into real estate with little money?

If you are ready to explore the idea of purchasing a rental property, there are a few things to consider. You will need 20% of the value as a down payment—so on a $200,000 property, you’ll need $40,000 in cash. If you don’t have that kind of cash on hand but you own your home, there are a variety of ways to extract the cash from the equity in your home, which is how most people do this. I can give you more information about this.

Next, you’ll need a spreadsheet. I have samples I can send you, but you’ll want it to incorporate estimates of the following:

·       Purchase price

·       Interest rate

·       Mortgage payment

·       Down payment

·       Closing costs

·       Property Tax

·       Insurance

·       Rental Income

·       Cash flow 

An experienced realtor can help you with estimates for these numbers. Running the numbers on a variety of different price points and interest rates will be really helpful at giving you an idea of where you want to be. We also really recommend trying some duplexes in your spread sheet as well. The purchase price and costs are higher—but not double—and you end up with two incomes rather than one, so they usually cash flow better than single family homes.

Location is very important so the first thing to do is to focus in on the best rental neighbourhoods. This is where a good real estate agent like myself can help you. Good areas will have the highest rents and the best renters and are in locations close to good schools, universities and shopping.

How to invest in real estate for passive income?

Passive income from cash flow is one of the reasons we invest, but surprisingly in many Canadian cities, investors don’t cash flow right away. In fact, it’s common to take a loss every month, usually for the first number of years. Cities like Toronto and Vancouver are known for this but as we know, real estate in those cities can increase in value very quickly, and the investor does eventually not only cash flow but build wealth as the value also increases over time. In Winnipeg, we’re still a young city and investors can cash flow right out of the gate because our real estate is affordable and rent rates allow for this. 

Once you’ve settled on a property, home inspections are important. I arrange a home inspection for all my investors. Whether it’s an old property or brand new it’s super valuable to get the inspection report because it will have very specific information about the home. The report is like having a manual for your home where it describes the mechanical details and to do list for the home. It will also describe the appliances and have the serial numbers noted as well so you know exactly what’s in the house simply by opening the home inspection report. 

I’ve been helping Winnipeg investors for years now and it continues to be one of my favourite parts of the business. Bottom line: it’s never too late to invest in real estate and I’d love to show you how.

 Whether you have questions, or you’re ready to get started on the path to earning great wealth, feel free to call me anytime.