Everyone has heard the saying that real estate has created more millionaires than any other investment vehicle in history. There are many reasons why investing real estate makes so much sense.
Many people decide to buy their first home not really thinking about the potential long term impact it can have on their lives and their future.
And over time, real estate can treat you very well, regardless of the market. When you buy, pay off the mortgage, you will eventually have an asset that you can rent. The city or town you do this in can have a huge impact on your eventual outcome.
I have heard about some small town areas in Canada that have become literal ghost towns. People have bought places that have virtually gone to zero because everyone has left, there is no prospect to rent or develop those properties.
Today, instead of the more traditional thinking on real estate I’ll share some interesting strategies I’ve seen used by many of my clients and investors. These can apply, if it’s your first home, if you are changing residences, or if you are considering additional real estate holdings.
The old adage location, location, location still and will always will hold true. And normally, the first question someone asks themselves is “will I like this home and be happy here?” If your purpose for buying is to live in the home, that is a natural question, but I challenge you to go further and start thinking like a wise investor.
Additional questions to ask include:
How can I increase the value of this home? This question will help you to start to look at real estate differently. It will open your mind, allow you see opportunities you could not see before and ultimately, help you find great homes and investments.
Does it have additional revenue potential (garage rental, suite, suites or carriage home)?
When you get approved through your bank, it is usually based on a few factors including your income, credit rating, history with your bank and your loan to value ratio. One way to increase the amount they will lend you is to buy a home with built in revenue. Alternatively, you could buy a home that has the potential to add in extra revenues, put them in and increase the value of the home. This would increase your value and your revenue.
Is there subdivision potential?
In a healthy real estate market, there will be builders looking for good building sites. Some builders are willing to go through the rezoning process of a property, but most prefer to buy a site with very little wait time. If you buy a home where there is potential for subdivision and you take it through the process, you can earn great rewards.
Is there rezoning potential?
This is a similar strategy to subdivision, where you can dramatically increase the value of the land by changing the potential use. Early in my career, I heard about this being “highest and best use”. This is not easy, but it can be learned. And once you have gone through this process, you will now have a skill set that allows you to duplicate the process over and over.
If I do an extensive renovation, can I increase the value by hundreds of thousands of dollars above the cost of renovation?
This is worded this way because I have seen many renovations done throughout my thirty one years in real estate, and very often, these renovations were not done professionally.
Make sure you have your team in place when you consider a large scale renovation. You should consider working with talented, designers, architects and making sure you have a great plan before moving forward. It’s also very important to consider who the eventual buyer will be. This way, it is not just for you, and when the time comes to sell, you will be well positioned.
Is there potential to flip the home or contract?
For many types of projects, there will be opportunity to sell the property, or even the contract you have on a purchase, prior to completion of the project or the purchase. This should be something you are considering at all times, regardless of the type of home or project you are acquiring.
What is the long term vision of the City for this area?
The first way to find this out is to go to the city and speak with their planners. Ask them for the OCP (Official Community Plan) and if they know of any changes being planned or considered for the next OCP?
Is there any new rail or transit coming to the area?
Generally, if you own property along a sky train route (rapid transit), close to the prospective terminal, you can anticipate the city will increase the density. If you are looking into buying or selling your home, looking to invest and looking for opportunities in and around the Vancouver real estate market, you can always add me as an information resource to help you with your goals.