Here are some things to think about when looking for a rental property:
Location – The area the property is in will dictate the type of renter you can attract and the amount of rent you can charge.
Property – Is there more than one unit? If so, are they legal units? Do they have separate utilities? Are you going to live in one of the units? What kind of condition is the property in? Is there going to be a lot of maintenance needed?
Costs – First there is the down payment and the closing costs, such as land transfer tax, legal fees and HST on new construction(HST rebate can be applied for after closing). Once you own the property there is mortgage costs (interest), property taxes, insurance, utilities, maintenance and vacancy. Experts say to factor 2% of the property value as an annual maintenance budget.
Risks – A renter doesn’t pay their rent. Damage to property by renters. Possible calls at all hours from tenants.
Do your homework – Know your rights and obligations as a Landlord. The best source of information for this is the Residential Tenancies Act. Vet potential renters – do a credit check, call their references and employers.
Planning & Budgeting – Doing a cash flow analysis for the property will help determine if there is positive cash flow. It is important to decide whether you are looking to make money every month as an income or if you are looking to do this as more of a long term investment and you are okay with it possibly being break even each month.
The idea of having someone else pay your mortgage is a wonderful one. If you do your homework and find the right property it can be a very profitable investment.
If this has been a financial goal of yours, please contact us to discuss.