The lure of owning an investment property is quite appealing, and for good reason. Real estate values keep going up, and the demand for rental properties is high – especially here in our region. Having an investment property can mean you have a steady income from the rental unit(s), as well as a nest-egg to fall back on when it comes time to sell the home, assuming there won’t be a hefty mortgage left on it in years to come. However, there are both positive and negative sides to investment properties, so I’ve outlined 5 top tips to consider to help you decide if you’re truly ready, so you have a higher chance of success when the time comes:
- Know the market
Being a real estate investor is not for the weak of heart. The economic climate can change suddenly, and you could find yourself contending with high vacancy rates, high mortgage interest rates, or a sudden drop in property values just as you’re hoping to sell. Do your research, stay on top of market trends, and make sure you work with experienced professionals; your Realtor, legal team and lender/mortgage broker will be able to advise you along the way.
- Pick a property in good shape
If you’re new to the world of investment properties, now may not be the time to purchase a ‘fixer-upper’ unless you are very handy yourself, or have a good contractor/crew to work for you. The more work a property needs, the higher your costs climb and it will take longer to recoup them in rent payments. Beyond the high costs, constant repairs and renovations are time-consuming, so unless you’re able to attend to such matters on a timely basis, you may find yourself in over your head. If your investment property is in another city from where you live, be sure that you can hire someone to handle any matters when you aren’t available.
- Understand your role as a landlord
Are you ready to be a landlord? There is definitely some risk involved, which is why it’s essential to understand the legal rights and responsibilities of this job, as well as for the tenants too. Further, you’ll need to know the provincial and local by-laws on rental properties for your area, and make sure you’ve picked a property that’s legally zoned for rental units; there are strict regulations to follow. You’ll want to have a legally-drafted lease agreement, as well as have a contingency plan for unexpected occurrences, such as unpaid rents, fire, damage and so on.
- Pick great tenants
You’ll want to attract responsible tenants who’ll help take care of the property, and hopefully stay there for an extended period. If you plan on renting to college or university students for example, that will look a lot different from renting to an older population. Be sure to do your research to find out more about the neighbourhood in which you plan on purchasing the property, and what kinds of tenants would be most attracted to living there. Once you’ve carefully screened for and secured great tenants, be sure to keep them happy by providing excellent maintenance on the home and carefully following the rules and regulations.
- Treat it like a business
Owning an investment property isn’t a hobby, it’s a business, and it requires some business savvy in terms of the finances and records that need to be maintained. For example, you’ll need to manage all the receipts, lease agreements, tax information, insurance, bills, copies of correspondence and so on for each unit you rent out. If you’re not sure how to go about managing the financials, you can always hire a bookkeeper or accountant to assist you.
After reviewing those tips, do you feel more or less ready to dive into the world of investment properties? It can certainly be a great way to increase your wealth, but it requires a solid commitment and dedication to be successful. You’ll want to find the best mortgage solution that works for you, so be sure to connect with me today. As an experienced mortgage broker in Barrie, I can help you determine if you’re financially ready to take on the role of a landlord and owning a rental property. Connect today and book an appointment by calling (705) 315-0516 – it’s that easy!