In Brampton and the Greater Toronto Area, an investment property is being increasingly viewed as a great way to build a pension plan, particularly since so many are not covered by workplace plans. Over the long term, investing in property can be a great source of retirement funds. Rental income typically pays for most or all expenses and property appreciation has often outperformed stocks and bonds over the long term.
This is not a concept just for well-established business people and experienced homebuyers. In addition to building long-term wealth, there are definite reasons ordinary citizens of Brampton and the GTA are looking to an investment property to meet their needs now and for the future:
- Often first-time buyers want to move directly into a single-family home in the area they love, preferring to get mortgage assistance from a rental suite instead of purchasing a condo at a lower cost.
- Parents who add up the cost of accommodations for their university or college-bound children are often deciding to be landlords themselves, seeing an opportunity to offset the cost of housing with a sound investment
- Some homeowners want to lower their mortgage cost so they can channel money into other investments like RRSPs, TFSAs, RESPs, become mortgage free sooner, or to gain the freedom to move into a new lifestyle i.e. to travel, start a business, become a stay-at-home parent.
How much downpayment is needed? If you as the owner will be living in one of the units, then the property is considered owner occupied. If it is non owner occupied, then a larger downpayment is required:
- Owner Occupied:
- 5% down for 1-2 units on the first $500,000 and 10% on any amount over $500,000
- 10% down for 3-4 units
- Non-Owner Occupied – 20% downpayment is required
If you have enough equity in your primary residence, you may be able to purchase your property through a refinance. This can be a great way to purchase your dream retirement home and lock the price in now instead of waiting until you retire.
Ideally you want it to be cash flow positive right from the beginning. Additional considerations include:
- Can you cover this and your own property?
- Have you factored in closing costs?
- Are repairs needed before you can rent?
If you are thinking about building wealth with an investment property or for more practical reasons, get in touch to have all your questions answered. I can help you determine your downpayment options and run the financial calculations that you will want to see for cash flow and capital appreciation.
Brampton and the Greater Toronto Area, I am here to help you build wealth! Contact me today.
