BAR?? Yes BAR, which stands for buy, add value and refinance. The toronto real estate market is hot and finding good deals can be a challenge especially when supply is low and there are quite a few interested buyers (I wonder how many are frustrated with their stocks and have decided to invest into real estate). A property that shows well in a good area will probably go for over asking or very close to asking price. I have come across listings where the sellers were disappointed for not getting multiple offers which resulted in increasing the listing price the next morning!
It can be frustrating since real estate investment is about numbers and not getting emotionally attached to a property. Working with a realtor who specializes in real estate investment is critical since they are knowledgeable in a local area, know local rents and understand how to add value to a property to create additional income.
Here is an example of a property I came across in Toronto: a 2 bedroom, 2 bathroom semi-detached with a finished basement in the "beach". The potential was to separate the main floor from the basement (creating an additional income suite) and adding a powder room w/ laundry on the main floor. The strategy is to create a second income suite up to code and refinance the property once the renos are complete to recover the renovation costs. This accomplishes the following:
- Increase property value
- Increase rental income (2 incomes versus 1)
- Create positive cash flow property
BAR (buy, add value & refinance) is one strategy for real estate investors to create long term wealth. It's key to have a strong experienced team (realtor, mortgage broker, contractor and other trades) who understand what the objective are and have done work for real estate investors.
To discuss your personal real estate investment portfolio or questions regarding real estate investment, please contact me.