Have you made real estate something of a cash cow? How to make sure that selling properties other than your principal residence, works for you
Develop a Real Estate Investing Plan
Perhaps the home you’re selling isn’t your principal residence, but one you have purchased for investment purposes, or to gain income in the form of monthly rents. While you likely won’t face the emotional issues that homeowners often feel when selling their beloved homes, you still have to have a smart game plan. Here are some steps to take when considering the sale of secondary properties:
- Clarify your current financial position. Do you need to sell now or does it make more sense to continue to let the goose lay golden eggs?
- Develop an action plan for reaching your objective: what financial requirements do you wish to meet with the sale of your property?
- Choose a timeline for implementing this action plan: income properties, often divided into several units, can take a little longer to sell than single family residences – as can commercial or mixed-use buildings.
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Selling Your Investment Property
Buying investment real estate in the first place can be a key component to any good long-term strategy for financial security. While this strategy often works best for those who adopt a long-term mindset for their investment properties, life circumstances can and do change. You might be thinking of selling your investment property to better enjoy your retirement years or because of changes in your current financial situation. It’s always important to speak to a real estate professional before making a firm decision to sell. Jamie can offer insight into issues such as market timing and pricing, and suggest a strategic plan for getting your investment property sold.
Here are some hints on getting the process started:
- If you’re a very hands-off landlord whose property is managed professionally by a third party company, you might not know much about the day-to-day details of the property anymore. Contact the property manager to request the details of the lease, including current rent and expiration date.
- Obtain contact information for your tenant(s), who will have to be informed with proper notice of your intent to sell the property.
- Obtain information on carrying costs for the property, such as average annual utility costs and property management fees.
- Inspect the property personally and make repairs where appropriate.
Flipping Toronto Homes for Profit
Just about everyone would like to make money in the Toronto real estate market by flipping a home! If you aren’t familiar with the term, it generally refers to the idea of purchasing homes in various degrees of bad repair – from those that need updating and renovations to full on, tear-down gut jobs bought mainly for the location and land value – then fixing them and quickly re-selling them at a big profit (without ever living in them personally). Once just the domain of contractors and other industry professionals, now anyone can get in on the act.
There are three ways that you can flip Toronto homes; each one is suited to a different type of situation. The first and most commonly known method is known as retailing, described as ‘flipping’ above. To make this a success, you need to know or have access to the following information:
- accurate, current real estate reports on up-and-coming neighbourhoods, including:
- the best streets to buy low and sell high
- upcoming urban renewal projects that may influence resale value
- the demand for renovated homes of the type you will be producing, in a particular area
- the right renovation techniques, and professionals who will complete your renovation quickly and at a reasonable price, so you can realize a profit at sale time.
The second way you can flip a Toronto house is though wholesaling. Wholesaling involves finding a suitable home for sale, then quickly flipping it to an investor for a fast profit – one that is usually significantly smaller than what you would get if you renovated the home yourself, but that also saves you the hassle, expenditure, time and stress of having to fix up a home and put it on the market. To do this, you’ll need to know:
- the real estate investors in your area
- the types of homes that flip the best
- how to finance your property so you can flip it to them
The third way to flip a house is by assigning the purchase. Using this method, you buy the property, but instead of closing on it yourself, you assign it to a real estate investor in exchange for a small fee. The investor will assume the contract and close the transaction themselves.
Before You Jump Into Flipping…
If you’re hoping to break into the Toronto real estate market and make big bucks, please remember that residential real estate in Toronto is nearly always a good investment – whether you live in the home personally or not. Owning a single principal residence puts you in a great financial position both now and in the future. However, if you are enthusiastic about the idea of buying real estate for the sole purpose of quick profits, the following caveats about flipping houses are good to keep in mind:
- Flipping homes can take quite a bit of work on your part. Restoring homes isn’t easy, and you’ll need to have a team qualified to handle the work.
- Assigning the purchase may be difficult when you first start out, although like anything else, it will get easier with time and practice.
- There are only certain types of properties that are suitable for flipping.
- In order to have a good understanding of the amount of money you will need to invest in a fixer-upper property, it’s a good idea to have a home inspection done.
- Always look at the cost of the home plus the cost of the renovations to make an informed decision as to whether you could realistically sell this house on the Toronto market at a much higher price.
With time and practice, you could become an expert at flipping houses for cash.