In recent years, building a custom home instead of buying an already existing one has become the preferred option of many homeowners. The advantages of custom building are many, but the main one is that it provides the perfect opportunity to have a home that is tailored to each family’s needs and wishes. Nevertheless, the motivation to build a home from scratch depends on each homeowner.
In our experience as Calgary inner city home builders, we have determined a home building project’s goal is either to create a forever home or an investment property. In our last entry, we gave you the basics of building a forever home. Today, we would like to show you some tips for building an investment home, which means a property created to generate revenue.
Building an investment home? Selecting the Right Custom Home Builder is Key
When planning to build an investment home, the first thing you should do is looking for the guidance and expertise of a professional Calgary custom home builder. Many homeowners are tempted to go through this process on their own, but the truth is that you will need a support system that will make sure you are investing your money the right way.
The right builder will not only provide you with advice on details that may fall through the cracks otherwise, but it will also offer you a whole team of professionals to manage every stage of the process. They will also monitor the building site and keep you posted on every little detail, so you don’t feel stressed or overwhelmed.
Once you have chosen the right home builder in Calgary, you must establish good communication with your team, so you end with the exact kind of investment property that you want. We recommend you are always honest with your builder when it comes to your expectations on both the building process and the type of revenue you would like to generate so you can plan together a smart investment strategy.
Define your Goals for your Investment Home
If you are ready to build an investment property, the next big question you should ask yourself is which are your investment goals. Some homeowners are eager to sell the home once is built, while others prefer to keep the property and enter the rental game. We suggest you discuss your return on investment expectations with your chosen Calgary custom home builder to define whether you better rent or sell the property once the project is completed.
On the one hand, if you are looking to obtain fast capital growth, then the best option is to sell the property once the project is completed. On the other hand, if you prefer to generate a fixed monthly income, then it is advisable to hold the property for a long-term period.
In the first scenario, take into account that you should look for a minimal capitalization rate of 7% and make the most of the boom periods in the real estate market. If the rental scheme is the one you prefer, try to invest in transitioning or gentrified areas that will increase your property’s value over time. In either case, condos, townhouses, two-storeys, and single-family homes have proven to be good investment options.
One of the main advantages of building an investment home instead of buying it is that you won’t inherit any structural or functional problems, which will be great for your wallet in the long run. Nevertheless, one common mistake among many homeowners is miscalculating their real investment budget. Take into account that your numbers must include building, insurance and maintenance costs, plus an emergency amount. By working with an experienced Calgary custom home builder, you can feel reassured your budget will be as realistic as possible.
If you are asking for an investment loan, make sure you have clear communication with your bank regarding your pre-approval, and you truly understand your cash flow before even starting to look for potential properties. There are many finance options, and all of them have a direct impact on the final investment profitability. Make sure you discuss all details with your chosen Calgary custom home builder and make any necessary questions before starting your project.
Pay Attention to the Possible Location and Demographics for your Investment Home
To make a significant investment plan, you need to consider your local rental market trends. Trusting your building project to a professional custom home builder in Calgary is the perfect way to make sure you will pick the right location to generate a positive return on investment. Make sure your chosen builder shows you different location options and their growth potential, while also looking at figures that help you to buy a property of interest for locals. Remember to always think about your potential buyers or tenants.
When looking for the perfect location with the help of your Calgary home builder, take into account demographics. You should try to find out who are your potential buyers or tenants, what are their activities and lifestyle, how much are they willing to pay to live in each area, etc. For example, if you are considering to invest in an area with an active student life, the proximity to transport and universities is essential, while if your demographics is composed by families that want to settle down, then you should pick a location near school zones and amenities.
Your Investment Home is not your Forever Home, Don’t Get Emotionally Involved
This may be one of the most difficult tips to follow, but it is probably one of the most important ones. In our long experience as investment home builders in Calgary, we know that property hunting can become a very emotional process for many homeowners. If you are planning to build a forever home, emotions will have an essential role on the final decision you make, but when it comes to investment properties, the best advice is to buy with your head and not with your heart.
It is critical that you weigh up the pros and cons of every property you consider by keeping in mind your desired return on investment. Try to look at each property as a landlord, not as an owner, and imagine how potential homeowners or tenants can feel attracted or discouraged by some of the property’s characteristics. We know it can be hard to let your tastes aside during this process, but in the end, your investment home’s design, layout, and decoration need to suit your chosen demographics. We guarantee you the results are worth it!
Are you ready to build your investment home? Contact Sunset Homes today! We will prepare a class 3 estimate for your project, and provide you with the right tools for every step of the custom home building process.
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Too Long Didn’t Read (TLDR)
When building an investment home in Calgary, it is essential that you trust your project to a professional team, define your investment goals, calculate an estimated budget, consider location and demographics, and don’t get emotionally involved while property hunting.