First Rental Property

Hi Friend,

I hope you are doing well.  One of the most common questions I get asked by new real estate investors is,

‘Where should I buy a rental property?’

When I was first starting out as a real estate investor, all I knew was that I wanted to buy Oakville real estate, and that was about it.  I did not know any other details other than that.  Since then, I have expanded my real estate portfolio and I own Hamilton real estate and Toronto real estate as well.

If you are a new real estate investor and are wondering where YOU should buy your first rental property, you need to read this blog post.

The simple answer to this question is:

“It depends”

In my mind, it depends on 2 major factors…

These factors are:

1) Where you live 

and

2) How much capital you have to invest

Where you live

My answer to all new real estate investors is the same.  My answer is, “Buy a rental property close enough to where you live so that you can self manage the property’.  This does not mean that you have to buy your first rental property in the same city or town you live in.  The property you purchase can be in a neighbouring city or town.  The most important thing to consider here is that the property needs to be close to you so that you can manage it YOURSELF.

How much capital you have to invest

This is a tricky point because a lot of new real estate investors don’t understand this concept right off the bat.  Depending upon how much capital you have to invest will definitely influence where specifically you invest.  Here is a clear example to help illustrate this point:

CASE STUDY

You have $100,000 to invest in a rental property and are trying to determine between 2 towns, which is the better town to invest in.  The towns are, Town A and Town B.

Town A

Town A has rental properties that cost on average $500,000.  The appreciation of properties in Town A year over year have averaged 7%. The tenant profile in Town A is low maintenance and the type of tenants that rent are professionals earning above average incomes.

Town B

Town B has rental properties that cost on average $150,000.  The appreciation of properties in Town B year over year have averaged 3%.  The tenant profile in Town B is high maintenance.  The type of tenants that rent are individuals with sub par credit history.

If you are a new real estate investor, take note.  You invest your money in Town A.

You invest your money in Town A because…

• You will have ‘easier’ tenants to manage, and,
• You will experience greater property appreciation.