Hello all, here looking to get some advice as I look to make my first real estate investment! First off I'll explain a little bit about myself. I am 23 years old and rent a small one bedroom apartment with my girlfriend in Barrie, ON, Canada and have recently began a career in sales. I have become fascinated over the past few years with investing, particularly in real estate. My goal is to accumulate and hold rental properties with a positive cash flow, overtime essentially creating my own real estate "empire", however first I must get started. With little capital to begin my journey I am leaning towards finding a residential property (<5 units) to take advantage of a 5% down payment for first time home buyers, however from information I've gathered online I've found a few parties which recommend, if possible, to start with commercial properties (>4 units). I am also unsure, with my goal of accumulating many properties over time, if starting a corporation to hold the real estate in is something that should be considered.
Any advice regarding these topics would be greatly appreciated!
Hi Jason. In the past few months I purchased and rented my first property at the age of 36. Here are a few things I learned doing my first one;
- Start now, don't wait. Pretty much every person I know says " I wish I bought a rental 10 years ago", "why didn't we buy another property when prices were lower it could have doubled by now?". This was the ultimate driving factor that made us pull the trigger.
- Take each part of the process one step at a time. I found my mind constantly wandering, thinking about things that may happen 3 months down the road before I had even pulled the trigger on the purchase. "What if I get bad tenants?" What if it's more work and money than I think?" These questions don't even matter until you've purchased a property. Keep them out of your mind until you are forced to deal with them. Otherwise you will hit analysis paralysis and not even start.
- If I could go back to 23 I would start by house hacking 100%
- Our first was turn-key, meaning it was basically ready to rent right after we closed, with some minor repairs. This was the best way for us to get started, it might not have been the best deal on paper but it was a huge factor in helping us pull the trigger. If major renovations were required I think we would have been overwhelmed and possibly hit analysis paralysis again and not done anything.
Let me know if you have any more questions. I'm far from experienced but just went through my first deal and these are the main things I learned.
Hi @Jason Meszaros , I am also looking to make my first real estate investment in the coming months. If I were in your situation, I would definitely pursue house hacking. Not only would you be able to purchase anything from a 2-4 unit to help subsidize your mortgage (and possibly generate cash flow) but you also wouldn't require a whole lot of capital out of the gate. After a year, if you aren't happy living there, you can move out and rent your previously occupied unit.
Once you get your feet wet, I would agree commercial properties are more likely to maximize your potential cash flow but you will likely encounter more headaches and issues and require much more capital.
In regards to incorporating always talk with a lawyer and be weary with what people tell you unless they have substantial real experience investing, Not just hear say of “someone they know”. All of your write offs are going to be the same whether you incorporate or hold personally, at least for your first few rentals. Even if you incorporate the bank will still make you personally guarantee your building.
There is an argument to be made that if you get sued the plaintiff can’t come after you personally. again talk to a lawyer regarding this point as that may not 100% be the case.
You will pay money registering a business and it is going to further complicate your taxes so talk to an accountant as well to understand the tax implications.
Thanks to all who replied, your input if very much appreciated!
I do have further questions regarding mortgages however. Is it true that for first time home buyers 5% down only applies to a purchase of up to $500,000, any difference beyond that 10% applies? Also interested to hear if people use interest only mortgages to maximize cash flow?
Yes you are correct regarding 5% on the first $500k and 10% for any amount over. So $600k property would be $35k down. (Not including legal / closing fees)
I never did an interest only mortgage before so I can’t help you there. To be honest I am not familiar.