Table of Contents
When you think about real estate investing, do you picture the hustle and bustle of investing in big cities such as Toronto, Ontario? Or perhaps you imagine owning single-family homes in a small town such as Huntsville?
Regardless of where you choose to invest, it is important to remember that not all investments are created equally. In fact, a prime real estate investment in one city may be a cash sink in another. So, it is important to take the time to familiarize yourself with the difference between the fast-paced competition of big city markets and the long-game of investing in a smaller community.
Once you have familiarized yourself with the differences, you will be able to answer the question of how investing in big cities differs from small towns.
However, before we look at how investing in big cities and small towns differs on an investment side, let us show you how it difference on the mortgage side with a free strategy call at the link below.
Real Estate Profits in Different Ways
Before you can start analyzing the difference between investing in distinct locations, it is important to understand the two key types of profits you can expect to make in real estate and how each one can impact your investment strategy. After all, each of these options are more prevalent in different regions to due a variety of factors such as population density, cost of living and average purchase price for the property.
One of the main sources of profits that real estate investors seek is cash flow. This is the passive income that people talk about when they are explaining the benefits of real estate investing.
In essence, cash flow is the difference between the amount of money a property generates for the owner through rent and other forms of income, and the total cost of expenses associated with owning and operating the property. These expenses include things such as mortgage payments, insurance premiums, taxes, property management expenses, and more.
Ideally, investors want a property to produce a positive cash flow, meaning that they net a profit at the end of each month after all expenses are paid. However, sometimes a property will have a rough month and produce a negative cash flow, meaning that they lost money. As well, investors will occasionally buy properties that have a negative cash flow on purpose due to their potential to produce a significant profit through the second key method.
Negative cash flow is more common while investing in big cities as opposed to towns.
Appreciation and Equity
The second key method of earning profits in real estate is through appreciation and equity. Appreciation is the process of a property increasing in value as the market grows or through improvements in the property and is the primary reason that investors turn to real estate as a hedge against inflation.
Appreciation goes hand in hand with equity, which is defined as the amount of value you have built in an asset such as real estate. You can gain equity over time as you pay off the mortgage on a property, as well as through the property appreciating and increasing in value.
Appreciation and equity are the primary sources of profit for flippers as well as certain investors who choose to invest in more expensive markets where it may not be possible to earn a positive cash flow on all properties.
That means if you are investing in big cities, equity may be your key target.
Discover How To Buy Unlimited Rental Properties With This Step By Step Guide
Investing in Big Cities vs Small Towns -Different Places Value Real Estate Differently
The primary factor to consider when deciding where to buy real estate is the fact that different cities and regions value real estate differently.
For example, parking lots can be an incredible choice for investing in big cities due to the struggle to find free or affordable parking with the sheer number of cars on the road. However, in smaller towns with reduced populations, parking lots may not be as popular due to the increased amount of available street parking and the lower number of cars driving around.
Similarly, single family homes are often an excellent investment in small towns where property values and market rent are low enough for these houses to be considered affordable for renters. Meanwhile, if you are investing in big cities, these places often favour multi-family properties due to their ability to house multiple families for less when compared to the expensive cost of renting an entire single-family house.
Choose the Location That is Best for You
At the end of the day, the most important consideration when it comes to whether investing in big cities or small towns will make the best home for you to park your cash into real estate is your own strategy and goals.
If you are looking to build equity quickly in a rapidly growing market in order to expand your portfolio, strategies like investing in big cities such as Toronto are currently an excellent consideration. However, if you are trying to generate a steady, reliable cash flow, you may want to take a look into investing in residential real estate in smaller towns.
Of course, before you commit to anything you should always discuss your plans with your realtor so that they can direct you to the best investments in order to achieve your goals as an investor.
Finance Your Investments Canada-Wide
Whether you are looking to invest in your hometown or are planning on investing in big cities such as investing in Vancouver, British Columbia, you need to ensure that you have the best financing available for your properties. That means getting the highest amount of money at the lowest available rate from the best available lender.
Fortunately for you, our friends at LendCity have the solution for you. Using their network of expert lenders, you can rest easy knowing that your mortgage agent is going to pair you up with the most qualified lender for each investment property you purchase at any step in your real estate journey.
So, if you are ready to get started today, or if you would like to learn more about the complex world of real estate investing, visit LendCity.ca or call 519-960-0370 today. Alternatively, click the link below to book a free strategy call today.