Investment Properties in Canada
One of the best ways to make the most out of real estate is to invest in property. This is becoming a popular choice for many Canadians, especially as things are slowly shifting back to normal. Many are exploring ways to a more steady monthly income.
Owning an investment property is not without risks. The vacancy rate in three of Canada’s largest census metropolitan areas (CMAs) – Toronto, Montreal and Vancouver, have increased over the past year due to higher supply and lower demand. In Toronto, real estate investment vacancy rates increased to 3.4%, reaching a 14-year high. This is mainly attributed to the economic fallout caused by the COVID-19 pandemic.
In the long-run, investing in property’s absolutely rewarding. On another note, it can also turn into a headache if you don’t do it the right way. Here are 7 tips to guide you on how to invest in a rental property.
7 Must-Know Tips Before Investing in Rental Property
1. Plan financing early on
Figure out what you can afford to buy. You’ll need to prepare at least a 20% down payment for a small rental property investment.
Canadian banks are conservative and stricter when it comes to granting mortgages for rental property investments. Lenders want to make sure you have the capacity to pay your monthly mortgage payments for your rental property and residence.
To make your rental property more sustainable, opt for low-interest mortgages. Some lenders and banks usually offer higher interest rates. Visit DaisyRaouph.com to consult with a mortgage broker in Durham Region.
In order to increase your chances of getting a good mortgage for a rental property, take care of your personal finances. Get rid of any personal debts to strengthen your portfolio and consider debt consolidation if needed. You’ll also need to maintain a high credit score if you want to fit the criteria of mortgage lenders.
2. Work with an A-Team
Investing in real estate in Canada’s a whole different ball game as compared to buying a home for yourself. As a beginner in real estate, investing’s fulfilling, yet risky. This is why you need an A-Team by your side!
You’ll want to consult with a realtor and lawyer on how to be a real estate investor in Canada. You’ll also need a mortgage broker to help you find the best mortgage solutions for your first real estate investment and to help you get your finances in order.
3. Study the market
Whether or not you’re a beginner in real estate investing, you’ll need to do thorough research about the subject. Start researching locations, local neighbourhoods and check on the amenities as well. Now that you’re looking for a neighbourhood for your rental property, you’ll have different search criteria. It’s recommended to opt for a more affordable property in a modest neighbourhood.
A neighbourhood with a high employment rate, low crime rate and nearby amenities is most ideal. Don’t forget to check on the going rate of rental prices in the area and how their occupancy rates fare. You’ll want a neighbourhood with fewer vacancies, because that’ll mean a higher demand.
4. Crunch the numbers
Crunch the numbers to account expected and unexpected expenses of your rental property. You’ll encounter predictable expenses like taxes, insurance and maintenance. You’ll also need to make room for unexpected ones, such as tenants losing their jobs and thus, being unable to pay for a month’s rent or so.
We strongly recommend that you plan for these unexpected circumstances and set aside a portion of your income to cover this type of circumstance.
5. Avoid a fixer-upper property
Investment properties are challenging already and thus, to avoid the stress that comes with renovations, buy a rental property that requires little to no renovation. You might end up overpaying for renovations and repairs with not much left for contingencies.
6. Know your legal responsibilities as a landlord
Having rental property will necessitate you to enter into a new arrangement–a landlord-tenant relationship. To be a good landlord, you’ll have to be knowledgeable with local tenant rights, laws and protections. This’ll strengthen your relationship with future tenants and will also protect you as a landlord. Research on eviction rules, repayment agreements, and rental limits.
7. Always think long-term
Investing in real estate in Canada is most definitely for the long haul! There’ll be challenges and bumps ahead, but these are all going to be rewarding after all. The longer you own and maintain your investment property, the more you’ll reap the gains and benefits of investing in real estate.
Are you ready to be a landlord?
If you think you’re ready to begin your journey into the rewarding, yet challenging land of real estate investment, contact Daisy today! Daisy Raouph will help prepare you for your rental property investment by helping you secure the best and most affordable mortgage deals specifically for you. Consult with her today.