Buying an investment property can be a great long-term investment, with the added bonus of enjoying the income from regular rental payments. It also a great opportunity for first-time buyers to break into the housing market, as they can rent it out (or a portion of it) until they’re ready to take it over or sell it for something else. It’s also popular among people who are thinking of retiring in the next few years; they can rent out a home or condo until they are ready to downsize and move in, with the added nest-egg from the sale of their family home.
However, rental properties are different from owning your primary residence, and it does come with a fair bit of risk. If you are thinking about buying a residential or commercial investment property, be sure you’ve weighed the facts and understand what you’re getting into:
- Are you good with money?
While you don’t need to be a big business magnate or real estate tycoon to buy investment properties, the timing has to be right. For example, if you are tackling a hefty debt load or have business ventures or other obligations on the go that are tricky to manage, that might be a sign that you aren’t ready. You may have a difficult time getting financing for your new investment property or end up paying too high of an interest rate that could wind up sabotaging your profits.
Further, taking on an investment property means you have a business to run and you need to be financially prepared to cover ongoing maintenance, emergency repairs, and extended periods where the property is vacant. If you have another source of steady income, then this may not be an issue, but if you’re relying on your rental income, you may find yourself in financial hot water. As with any business, you’ll also need to be organized and keep careful records of all transactions for tax purposes.
- Are you the landlord type?
Most people who own an investment property or two often manage it on their own fairly well, depending on their other responsibilities. You will need to set aside time to look after the property, the finances and paperwork, and communicate with your tenants. You’ll also need to screen potential tenants, follow by-laws and regulations, and deal with problems as they arise. Your goal is to find great tenants who love your home, and who will stay there for as long as possible. Unfortunately, some landlords have to chase down their rent payments, deal with crises, and go through the courts or tribunal processes to get someone evicted or recoup lost rent payments.
- Are you handy, or at least resourceful?
Being a landlord means you have to keep up the maintenance on the property. This includes lawn care, snow removal, regular repairs such as clogged drains, leaky roofs, broken appliances, and so on. Between tenants, you’ll likely need to patch up walls and paint, as well as do other touch ups. You also need to look after emergencies, which we all know can happen at any hour of the day. If you don’t have the ability to manage these issues, you can always hire a property management company to do it for you, but keep in mind that it will eat away at your profits. Buying a property that’s in great shape will help cut down on some of the maintenance and repairs, but it’s still important to be prepared for emergencies.
Investment properties are great ways to diversify your investments, earn money, plan for your future, and learn great business skills in the process. However, you need to make sure you’re ready in order to be successful! Talk to me about buying an investment property and let’s look at your mortgage options. As a qualified, experienced mortgage broker, I’ll work with you to determine if it’s the right time for this next big step. Call me to book your appointment at (705) 315-0516; I look forward to working with you.