Edmonton Real Estate Investment

Brandon Scott is a Sherwood Park & Edmonton based mortgage broker and the author of a weekly column entitled Real Estate Solutions in the Sherwood Park News. This article was originally published on May 3, 2013

We’ve all seen the home shows on television of everyday people buying their first investment property. The goal is simple; they buy an older home that can be fixed-up or renovated with the hope of putting it back on the market to sell within a few months and make thousands of dollars profit. This is also known as ‘flipping’ and if only it was that easy. Lately it seems more and more people are inquiring about financing for these short-term projects without the knowledge or team in place to see it through to fruition. Getting the financing on a property to rehab and resell is just one component in the process. To ensure your ultimate success here are a few more points to take into consideration. First of all treat your investment like a business and make sure you have a plan in writing. This plan should detail not only specific objectives but also outline the practical responsibilities to achieve each milestone and deadline.  Next make sure you have accounted for the total renovation costs of your property along with a 15 per cent over run for incidentals or unexpected items that may come up along the way. Too often new investors don’t account for the inevitable; that labour and materials can cost more than they were planning for when they started. Having a cushion built into your budget will eliminate the surprise of being short of funds to complete the project. Next do your research. This may seem simple but getting emotionally attached to a home and the idea of seeing dollar signs can cloud your judgment. Make sure you have a realistic idea of how much the home should sell for once renovations are completed and have comparable properties to support that figure. Also it’s important to not forget your holding costs. This means that during the renovation if you take three or four months to complete the homes upgrades you’ll also be paying the mortgage, utilities, property tax payments, etc. These costs should be accounted for when determining how much profit the investment will net you once resold. The last and probably most important recommendation that can be provided to any first time property ‘flipper’ is to have an exit strategy. In the event that the renovations do not go as planned, cost more than you anticipated, or if the house doesn’t sell once placed back on the market what do you do? Think through each scenario to ensure the investment that you once hoped was going to bring you a hefty profit does not become a financial albatross. Download the current e-edition of the Sherwood Park News