Real Estate fundamentals

March 1, 2023

What aspects to consider when purchasing real estate

Real estate is one of the most significant investments that Canadians can make in their lifetime, and it has proven time and time again to be one of the most stable and fundamental asset classes a family can obtain in Canada. In Surrey alone, home prices have increased by over 280% in 15-18 years, making it a lucrative investment – returning similar results to the S&P 500. At Valour, we strive to ensure that you are equipped with the right information and knowledge to make informed decisions regarding your most valuable asset.

When considering real estate investments, several factors are crucial to consider. Here are the most important ones:

1. Location is Key

As the old adage goes, "location, location, location" still holds true in real estate. A property's location can make or break your investment, so it's crucial to look for properties in areas with strong job growth, good schools, low crime rates, and desirable amenities. These factors will increase the demand for all properties and ensure that your investment will appreciate over time.

2. Cash Flow is Crucial

When investing in real estate, it's easy to overlook cash flow, but it is a critical factor. With the changing market conditions, it's essential to make sure that you can afford the home you choose to live in. This process involves calculating the set expenses in your monthly budget and maintaining a healthy margin with all other risks considered. You can contact a Valour member to get an idea of your real estate expenses today.

3. Understand the Risks

Real estate in Canada's hot markets tends to trend higher in the long term, but it's essential to keep in mind that there are still risks to consider. Interest rate changes, immigration shocks, and macro-level changes are just some of the potential risks that must be considered when buying real estate. To find out more about the potential risks you may face when investing, contact a Valour team member today.

4. Do Your Due Diligence

Warren Buffet famously said that "risk comes from not knowing what you're doing." As an investor, it's crucial to understand the value of your assets on a deeper level. This involves researching recent development changes and having an understanding of what you can do with your property in the future. Especially by using valuation methods such as the comparable method or the cost method, having an idea of market- competitive price per square foot numbers, you can make informed decisions that will help you avoid overpaying or underselling your property.

5. Consider Your Investment Goals

Different types of real estate investments will align with different investment goals. For example, if you're looking for passive income, a rental property may be the best option. If you're looking for long-term appreciation, you may want to consider investing in a commercial property or land. Regardless of your goals, having a deep understanding of the market is crucial to ensure that you are using your money in the best way possible. Even in highly competitive seller-markets, such as in 2021, a deep understanding of the market can help you protect your assets and help you to make informed decisions for the long-term.

In summary, real estate can be an excellent investment when done correctly. Location, cash flow, understanding risks, due diligence, and investment goals are all essential factors to consider. By keeping these in mind and working with professionals with a deep understanding of the market, you can make informed investment decisions and build long-term wealth through real estate. At Valour, we are committed to providing value and we are always here to help you achieve your investment goals, so don't hesitate to contact us at any time.