Are you considering your first real estate investment in the Greater Toronto Area?
It’s certainly an exciting time for the market – residential real estate sales in the Durham region are booming, showing record year-over-year growth! And prices and sales are expected to remain strong.
If you’ve done some research already, you know that real estate investment can be interesting, safe and financially rewarding. You may also realize that it can be intimidating and challenging to make your first investment considering the high prices and dwindling supply.
How can you get started?
For many first-time real estate investors, the ideal way to get into the market is by partnering with an investor with whom you can split the expenses and the profits.
A partner who supports you throughout the entire process can make all the difference for both first-time and more seasoned investors. A partner investor can help you mitigate risk and ensure your investment is successful by helping you:
- Find the right property in the right location
- Analyze the potential investment and manage the purchase process
- Coordinate the renovations, screen tenants and manage the property
- Provide quarterly financial reporting so you’re fully informed and feel comfortable and confident about your investment
- Manage the sale process and profit distribution at the end of the deal
Still have concerns about making your first investment? Don’t worry – that’s normal.
If the pandemic has taught us anything, it is that life can sometimes throw us a curveball. You can plan as much as you’d like, but sometimes unexpected events still occur that could require an early exit.
Here are two options for exiting a deal early and their implications. Knowing what’s possible can help you feel fully informed before moving to the next stage of your real estate investment process.
#1. Partner buyout: your real estate partner(s) may be able to buy you out of the deal.
- Keep in mind: should you require your partner to buy you out of the deal, you may take a loss on your initial investment if there hasn’t been enough time to build appreciation and pay down the mortgage (ARTOL investments typically last five to ten years). This is not always the case, but it can happen.
#2. Other investor buyout: another investor could be found to buy you out.
- Keep in mind: the investor would have to be a good match for the deal, but it’s an arrangement that can be facilitated with the assistance of a legal team on both sides. If you have an interested party and they seem like they would be a good fit then this is definitely a viable possibility.
Of course, the ultimate goal with real estate investment is like any other – to make a profit. So, ideally, you won’t need to exit your investment early. It is, however, very helpful to know what your options are if your financial situation unexpectedly changes, and you need to exit early.
With both options outlined above, the process of exiting your deal early would be completely dependent upon the initial deal you make with your partner investor. Therefore when choosing your real estate investment partner, ensure you find somebody you trust.
It’s incredibly important to ensure your initial partnership agreement very clearly outlines how each party would be covered should any unexpected situations emerge. A trustworthy partner’s goal should be to mitigate risk – having alternatives clearly outlined should someone need out of the deal early is one way to help mitigate that risk.
Being as prepared as possible, even for things we don’t anticipate, is what helps protect both partners. An exit strategy exists to give peace of mind and offer solutions for the unexpected.
Still not sure if you’re quite ready to take the real estate investment leap? Here are ten questions you should ask yourself to help you decide if real estate investment is your ideal investment strategy.
