With the new year right around the corner, it’s time to start thinking about your real estate goals and objectives for 2018. Whether you aim to buy your first home or to build a profitable real estate investment portfolio, here are a few ideas for resolutions you can set this year:8 Real Estate Resolutions for 2018 – Montreal Buyers and Investors
1. Get your credit score back on track
A CBC Canada survey revealed that only 7 per cent of Canadian adults have checked their credit reports in the last three years. Chances are, you already know how important your credit score can be to your financial future and to your mortgage pre-approval. In 2018, every prospective buyer and investor should aim to understand how a credit report works, monitor their score, and do everything they can to keep their ratings above 700.
2. Fatten up your savings account by following the 50-30-20 rule
If you’re saving up for a downpayment, 2018 is the year to master your financial discipline. While household budgeting can seem like an overwhelming task, there are tried-and-tested guidelines you can follow to plan your monthly expenses and cashflow. The 50-20-30 rule is a commonly recommended guideline which breaks down your monthly budget into three spending categories:
- Not more than 50% of your income should go to essential living costs. This includes rent, bills, food, transportation, and insurance.
- At least 20% of your income should go towards your financial future; either in a savings account, or towards investments, or debt reduction payments.
- Not more than 30% of your income should be used for non-essentials. This includes all personal spending choices such as gym memberships, entertainment, travel, recreational activities and retail shopping.
3. Be less emotional when it comes to real estate investing
It’s easy to lose focus when shopping for an investment; either by getting overly attached to a property, or by settling for a less-than perfect opportunity due to impatience. The key to making smart investment decisions is to let the numbers do the talking: set very rigid financial goals and benchmarks before starting your search, and accept that it’s better to hold out than to compromise on your margins. Use a detailed investor’s calculator, like our free downloadable ROI worksheet, to plug in your operating expenses, loan amount, interest rate, and expected rental income, and determine whether a property meets your investment objectives.
4. Become a pro at finding hot deals
When buying real estate, your money is made at the purchase. The most crucial aspect of a real estate investment is acquiring the property under market value, which requires a strong understanding of market trends and statistics.
Here are a few ways investors can find BMV (below market value) properties in Montreal:
- Set up a property alert for repossessions in your preferred neighbourhood. Repossessed homes tend to be listed below market value since they are being sold by the bank, rather than the seller. Note: indicate that you are looking for repossessed properties in the “Additional Criteria” section.
- Request a list of top properties listed below municipal evaluation in Montreal.
- If you think a property might be listed below market value, request a free professional evaluation of the property’s current worth.
- Ask your broker to send you his or her own selection of BMV properties. Many brokers have access to pre-market BMV properties, which are likely to sell even before they are listed online.
- Subscribe to a Deal of the Week mailing list, which will send you the single best BMV property on the market every week by email.
5. Get pre-approved… as soon as possible!
A pre-approval should be the first step in every buyer’s home-hunt. Don’t wait until you’ve started visiting properties or until you’ve found your dream home. Here’s why:
- A pre-approval determines your exact buying capacity. Finding out exactly how much a bank would be willing to lend you prevents you from wasting your time looking at properties above your budget, and will steer you away from potential heart-ache down the line. Don’t forget that a pre-approval is not based solely on your salary, but on a range of different financial elements such as your debt to income ratio, your credit score, and the stability of your income over the past three years.
- A pre-approval locks you in at the lowest interest rate. Getting a pre-approval secures the best term for your financing for a predetermined duration, varying from 45 to 90 days depending on your bank. If the interest rates spikes while you’re looking for a home, yours won’t be affected. And if they drop, you’ll still be able to cancel your terms and benefit from the lower rate. It’s a win-win either way.
- A pre-approval requested in 2017 will increase your purchasing power: As of the 1st of January 2018, a Mortgage Stress Test will apply to all new loans, not just insured mortgages under a 20% Loan to value (LTV) ratio. The new regulations will automatically reduce your borrowing capacity by a minimum of 18.5%. If you’re planning on buying a property within the first 3 months of 2018, we would recommend applying for a pre-approval before December 31, 2017 and saving 18.5% of your buying capacity.
- A pre-approval will strengthen your offer: By having a pre-approval on hand when you put in an offer, you reassure the seller of your commitment by having already taken the first step. This is especially important for hot deals- properties that are below market value or that offer an incredible value for price. These listings only stay on the market for a couple of days before receiving an offer. You’ll be at a considerable advantage if you can submit yours without having to wait for your pre-approval to come in.
6. Build a real estate team you trust
Whether you’re a buyer or an investor, you’ll want to align yourself with a knowledgeable professional who can raise the red flags on risky investment deals. Working with a broker is free on the buying end, so it makes perfect sense to turn up accompanied and represented during your property visits, rather than relying solely on the listing broker for guidance and information. Having a buying agent on your side will also be helpful when it comes to negotiations, legal counsel, and sourcing historical sales data to determine fair market value. In addition to your broker, you’ll want to connect with a reliable mortgage broker, an inspector, a notary, and a real estate lawyer if you plan on making larger commercial investments.
7. Get smart about your RRSP
Along with saving for your downpayment, 2018 is the year you should start contributing regularly to your RRSP account. Montreal’s Home Buyer’s Plan (HBP) allows first time buyers to withdraw up to $25,000 from your RRSP to buy your first home. If you’re buying with your partner, that’s $50,000 – an amount likely to cover your entire downpayment and closing costs. You then will have 15 years to reimburse the loan back into your RRSP account. While the tax-free loan can be beneficial, you should consult with your financial planner to determine whether the HBP is the right choice for you.
8. Set up an alert- it’ll save you time and money.
A property alert is an automated tool which notifies you each time a home that fits your criteria is listed for sale on Centris. You simply enter your budget, criteria and preferences, and then sit back and wait for the perfect match. With an alert running, you’ll be able to increase your market knowledge by keeping an eye on trends and average prices. You also won’t miss any opportunities – the best deals tend to receive an offer within a few days of being listed, so you’ll need to act fast to stand a chance at buying them.