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Maturité financière : Investissements hypothécaires et immobiliers

Maturité financière : Investissements hypothécaires et immobiliers
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  • Tvine
| Août 4, 2023
Révisé, Jan 24, 2024
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    Anthony Martin is the founder and CEO of Choice Mutual, a US-based insurance agency. His achievements and success in the insurance field are widely recognized by many in the industry, not to mention in a feature in Forbes. In this article, Anthony Martin lends his expertise to unpack the concept of money maturity and the importance of financial literacy when it comes to real estate investment.

    More than ever before, there is a need for everyone to have a good understanding of their finances and make responsible decisions with their money.

    Money maturity is the term used to describe an individual or household’s financial understanding. Individuals that are ‘money mature’ can budget, save and invest effectively, avoid unnecessary debt, and plan for their financial future.

    Key Highlights

    • The first step in real estate investing is to identify your investment goals and research the market.
    • Building a well-diversified real estate investment portfolio is one of the best ways to diversify your investment, spread risk across multiple properties, and generate a steady stream of passive income.
    • There are several ways by which you can maximize your returns on an investment, such as purchasing property in an area with strong potential for appreciation.

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    Taking the bold step of investing in real estate, particularly in the form of a mortgage, is one of the most remarkable milestones in money maturity. It is a decision that requires a lot of financial planning, research, and discipline.

    Homeownership remains a vital component of the Canadian dream, with the homeownership rate currently at 68%. However, buying a home can be daunting, particularly for first-time homebuyers.

    But despite these challenges, the long-term benefits of homeownership and real estate investing remain undeniable.

    In this article, we’ll take a closer look at how you can leverage mortgage and real estate investing and the steps you can take to maximize returns and minimize risk.

    Understanding Mortgages

    When you want to purchase a property, the money you borrow from a lender, such as a bank, is called a mortgage.

    When collecting a mortgage, you agree to pay back the loan, plus interest, to the lender over a fixed period called the loan term. And because the amount of money you borrow is usually a large sum, the lender may require you to put down a percentage of the purchase price as a down payment.

    Also, when you take out a mortgage, you must make monthly payments to the lender. These payments usually include the principal, interest, taxes, and insurance.

    Tips for securing a mortgage

    Mortgage lenders don’t just give out loans to everyone. They assess the borrowers and typically favour those with the applicable income and good credit history.

    Here are some of the essential tips for securing a mortgage:

    Improve your credit score: There are many benefits to having a good credit score, and securing a mortgage is one of them. Lenders almost always favour those who have a good credit score.

    So you must check your credit report to make sure there are no errors and work on paying any outstanding debts.

    Save for a down payment: Most lenders typically require a down payment of at least 5-20% of the home’s purchase price. Saving for a larger down payment can improve your chances of getting approved and may result in a lower interest rate.

    Be realistic about your budget: Before deciding to go for a mortgage, ensure that you factor in all the costs associated with buying a home, such as closing costs, property taxes, and insurance.

    Ensure that you can comfortably afford the monthly mortgage payments without putting too much financial stress on yourself.

    Be prepared to provide documents: Typically, when you apply for a mortgage, lenders require documentation such as pay stubs, bank statements, and tax returns to verify your income and assets. Ensure that you have all the necessary documentation before applying for a mortgage.

    According to Shawn Plummer, CEO of the Annuity Expert: « A mortgage is a long-term financial commitment, and it’s essential to have a clear understanding of the terms and conditions of the loan, as well as the responsibilities and obligations of the borrower. Before taking on a mortgage, it’s essential to carefully consider one’s financial situation and ability to repay the loan. It’s also essential to educate oneself on the various types of mortgages and the pros and cons of each, so that one can make an informed decision that aligns with their financial goals. »

    Real estate investing basics

    When it comes to investing in property, there are fundamental concepts and strategies that you must know to be successful.

    Jake Hill, Founder of DebtHammer says  »Real estate investing is one of the most powerful tools for building wealth and achieving financial freedom. But before diving into the world of real estate investing, it’s important to have a solid understanding of the basics, including how to analyze potential investments, finance options, and market trends. Only then can investors make informed decisions to help them achieve their financial goals. »

    The following tips will help you kickstart your real estate investing journey:

    Identify your investment goals: Do you want to generate a steady stream of rental income, or are you looking to flip properties for a quick profit? Knowing this will help you determine the type of property you should be looking for and the strategy you should use.

    Research the market: The next step after identifying your goals is to research the different types of properties available, the location, and the local real estate market conditions. It is crucial to consider factors such as the local economy, population growth, and the demand for rental properties.

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    Building your real estate investment portfolio

    Building a well-diversified real estate investment portfolio is one of the best ways to diversify your investment, spread risk across multiple properties, and generate a steady stream of passive income.

    Greg Heilers, Co-Founder of Jolly SEO mentions « The key to building a successful real estate investment portfolio is to diversify your holdings across different property types and markets, as well as to continually educate yourself about the industry and stay up-to-date on the latest trends and market conditions. »

    To start building your real estate investment portfolio, here are some of the steps you should follow:

    Have a clear investment strategy: You must determine your investment goals, evaluate your risk tolerance, and fully understand the potential returns and risks associated with different properties and markets. 

    Research different markets and properties: By performing adequate research, you can find the best opportunities that align with your investment strategy. It includes analyzing factors such as economic conditions, population growth, and property values in different areas.

    It is also crucial to thoroughly analyze the properties, including their condition, age, location, and potential rental income.

    Have a plan for managing and maintaining your properties: You must set up a budget for property management and repairs and develop a strategy for finding and retaining tenants.

    It is also essential to stay informed about changes in the market and the economy and to adjust your portfolio as needed to ensure that it remains aligned with your investment goals.

    Combining mortgages and real estate investing

    One common strategy in real estate investing is using the money you borrow from a mortgage lender to purchase a property you intend to rent out to tenants.

    In this scenario, the goal is to use the income generated from rent to pay off the property’s mortgage over time while potentially earning a profit from the appreciation of the property’s value.

    To understand how this works, let’s take an example of a person who wants to buy a property for $100,000. They may not have the total amount saved up, so they apply for a mortgage loan to cover the remaining amount.

    Let’s say that the person gets approved for a $60,000 mortgage loan, which means they have to come up with the remaining $40,000 from their savings or other sources.

    Once the person has the property, they will rent it out to tenants, who will pay rent to live there. The rent collected can then be used to cover the mortgage payments and other expenses associated with owning the property, such as property taxes and maintenance.

    Suppose the property is well-maintained and located in a desirable area. In that case, the rent should cover the mortgage payments, and the person may even have some extra money left to save or invest in other properties.

    As the mortgage is being paid off over time, the property’s value may appreciate, which means it will be worth more in the future. This can be an excellent way to build wealth over time. The person may decide to sell the property at a higher price, giving them a profit that can be used to purchase more properties or invest in other things.

    Maximizing returns and minimizing risks

    Without a doubt, the goal of every investor is to maximize returns while minimizing risks, which means making the most profit possible while reducing the chances of losing money.

    Ben Michael, Practicing Lawyer and Founder of Michael & Associates says : »Maximizing returns and minimizing risks is the key to successful mortgage and real estate investing. It’s essential to do your due diligence, carefully research the market and the properties you’re interested in, and have a solid understanding of the financial aspects of the investment before making a commitment. By taking a strategic and calculated approach, investors can maximize their returns while minimizing the potential risks involved. »

    There are several ways by which you can maximize your returns on an investment, such as purchasing property in an area with strong potential for appreciation, such as a city experiencing population growth or job growth. 

    It’s impossible to avoid risks in investing, but it’s possible to minimize the amount of risk you are exposed to. You can reduce the amount of risk you take on by thoroughly researching the property and the area it is located in and make sure to purchase a property that is in good condition and has the potential for future appreciation.

    Additionally, having a solid plan in place for managing the property, such as hiring a property manager, can help minimize risks.

    Final Thoughts

    Real estate investment can provide a strong foundation for financial stability, security, and money maturity. And even though it comes with inherent risks, there’s no doubt that with careful planning, research, and commitment investing in real estate can put you on the path to the financial prosperity you desire.

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