What You Need to Know When Buying Your First Investment Property

Kelowna AccountantKelowna accountant, Ken Davidson, offers some advice to new real estate investors looking to purchase their first investment property.

When you are making the decision to invest in real estate and purchase your first investment property, you’ll quickly discover that it’s much more complex than anyone initially anticipates. There are so many decisions that need to be made and the success of them all rests on your ability to make sound judgments that will pan out long term.

Where Do You Want To Go?

Once you know where you are headed, then you can start to find the stepping-stones to get there.

The problem I see with a lot of first time investors is they don’t really know what they want to get out of it. All they know is that they want an investment property so they go to their local bank and take out a mortgage to buy a house. Voila! They now own their first investment property!

The problem is that as you grow, you’ll find that certain banks lend at certain times so you need to know where you want to end up before you’re able to know who you should be asking for the money.

Related: How to Buy More Property With Little Cash

Where Should It Be Acquired?

Once you know where you are going to, then you need to sit down with your advisor or Kelowna accountant and determine Kelowna Accountantwhere your investment property should be acquired. What I mean is, you need to decide if you are going to hold the property personally or corporately versus holding it in a partnership or joint venture.

I have a lot of people ask me in my real estate investment presentations what they should do when they have investments they want to move. You know what I say?

Leave them where they are!

Moving investment properties between the different vehicles (holding it corporately vs. personally, etc) is a high cost venture (property transfer fees, potential income taxes or GST/HST, etc.). Generally on smaller investments (single family homes, duplexes, quads), I don’t recommend changing the structure once it’s done because the cost of changing simply doesn’t justify it.

Let’s recap:

  1. Know where you want to go, begin with the end in mind
  2. Speak with your Kelowna accountant or professional advisor and
  3. Know where your investment needs to be held for future tax and cash flow planning

Related: Best Practices When Setting Up Real Estate Investments

The main thing you need to remember when you get into your first investment property is that you really want to make it easy. Don’t try to get into something that is complex. You need to build your confidence level and knowledge base through investing over time.

A brain surgeon doesn’t just decide that they are going to begin performing surgeries on brains one day and then walk into the operating room! A lot of people who get into the property investment domain want to be where someone else is…but that person is already 20 years ahead of them.

Real estate investing can be very lucrative when done properly so always ensure you get the expert advice to make sure you reap all the possible rewards from your investment.

 

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