Canadians looking to get into the landlord game have a great number of investment properties from which to choose. However, there are some things to think about before plunging head first into this territory.
A property may look like a good deal, but there are some things to ask yourself (and your REALTOR®) before making any final decisions.
Here are six points to consider when thinking about putting your money into investment properties:
Ask around. Talking to people who already own investment property should be first on your to-do list. Networking is a wonderful way to get an in on what’s going on in the market. You can meet with investors face-to-face or get in on social media chats.
How much will you need to borrow? Getting pre-qualified for a mortgage is a good rule of thumb before getting excited about finding the perfect rental property. This way, you’ll avoid disappointment should things fall through.
The fixer-upper faux pas. If you don’t have any experience renovating homes, it’s probably wise to rule out any homes that are listed as fixer-uppers. If the place just needs some elbow grease and a fresh coat of paint, then by all means include it as a contender, but if it needs major repairs, it may be best to walk away if you can’t do the work yourself.
What will your rental income be? Before you sign on the dotted line, you’ll want to figure out what the rental earnings will be. If the property is rented, the current landlord will be able to provide you with a rental history. If it’s owner occupied, your real estate salesperson may be able to help you to decipher what rentals in the same area are going for.
Figure out your expenses. Income property doesn’t come without its occasional problems. You’ll also have to estimate what you’ll need to pay every month. Will you or the tenant be paying the utilities? What about taxes? All these expenses need to be accounted for.
Is the property worth it? Buying an investment property doesn’t mean that you’ve won the golden ticket, so take the time to do some research before making a decision. Your REALTOR® can help answer questions related to capitalization rates and cash-on-cash return rates. No question should go unasked when it comes to spending your hard-earned money.