Investment in PEI Real Estate

As a member of perhaps not the oldest profession, but certainly an older one, I see many of my clients, as indeed I do myself, invest in real estate here on PEI and make money. They generally purchase a number of properties, usually smaller, more run-down rental properties, but in some cases recreational or waterfront cottages and turn these into money makers. As well as positive cash flow they are building equity which they can later cash in on.

PEI is a great location for the novice investor to get started. Properties are generally less expensive and while they have risen over the years and continue to do so, the up and down movement is not so great and therefore PEI real estate offers an investment scenario more suited to the beginner. However with land prices throughout Canada on the rise again, and I notice a larger recent rise in home prices here, you can be sure that you will still have a solid investment.

Real estate offers much greater potential to make money than many other forms of investment and does not generally require the services of managers as in the case of mutual funds. You will want to carefully research your market potential and you will, in the case of PEI, first of all decide whether you will be buying residential properties to rent year round or cottages which rent at much higher rates but only for the summer.

It is important when deciding what to invest in here on PEI to determine the amount of money you have on hand and what you can afford to invest for the "long-haul", say anything up to ten years. Some investors get caught in the liquidity crunch and need to get their money out of the investment in a hurry. This means selling early and at a disadvantage and can result in losses.

If you feel this might apply to you then you should probably refrain from getting into the cottage market. The properties cost much more, are harder to re-sell in a hurry and require more work to rent. Small family rental homes provide year round income, require less maintenance having residents year round, and are generally easier to sell should you need to.

If you own your own home now then you are already a PEI real estate investor. If you have a sizeable equity built up in your home you can use this equity to smooth the mortgage application. Most investors are going to buy several if not numerous properties as they build their real estate portfolio and they are going to have to use that portfolio as financial leverage to acquire the next property. So you will probably start with your own home now!

The cities of Charlottetown and Summerside on the island offer a good selection of current single, duplex and triplex home rentals. Of course you can purchase some of the larger character homes and convert these to apartments. It is a good idea to look for homes that are in need of repair. Some owners will sell just because they don’t have the cash or desire to fix up a rental and it is getting to the point where it will need fixing to be rentable.

If this is the case make sure that you do your home-work and know the condition of the home and the cost to repair. Bring in a home inspector and make sure that you get quotes from reputable contractors on the work recommended.

Also ensure the neighborhood is suitable - however the island neighborhoods are generally good, the "bad neighborhoods aren't really "Bad".

Do your research and you will be growing your income through a steady stream of rental payments and your real estate portfolio will be bringing you that much closer to retirement.