Investing in a rental property is a great way to build long-term wealth and generate a monthly income. There are many factors that you must take into consideration when purchasing any property. By doing so, you can save yourself from any losses by making irrational decisions. Like any investment, you must conduct thorough research which will give you a better understanding of the property and you can implement your strategy accordingly.
Buying a rental property in Canada can be quite rewarding if you are willing to understand the different laws set by the country. For instance, there is no citizenship or residency required in buying and owning a property in Canada. A great place to invest in a rental property is in Yonge & Eglinton area as there are many new condos up for sale. As easy as it may sound, there are other factors involved in owning a rental property which mainly include the Canadian tax laws. So here are some key tips to keep in mind as you contemplate making a purchase in Canada.
5 Tips in Buying Rental Property in Canada
1. Finance early
Canadian banks are very particular when it comes to mortgaging rental properties. In order for you to secure your property, prime banks will follow a thorough check on your account for it to be approved. They basically want to ensure that you are capable of making your mortgage payments without affecting your debt to income ratio. Your investment property may not always be occupied by a tenant 100% of the time. So these banks need to clarify your ability to make payments without a monthly income. Thats why a strong credit score will qualify your mortgage request on your rental investment. Another method you can consider is applying for a home equity load which is easier to apply and claim.
2. Avoid Fixer-Uppers Investments
When purchasing your investment property, there are a lot of components involved before you start renting out your property. There are certain laws set by the country which you must follow to the letter to avoid any problems from the system. If its your first investment, choosing a property that requires home renovation can cost you time and money. So try you best in avoiding any fixer-upper investment properties so that you spend less time in repairs and renovation. As you become more experienced, these fixer property’s can help you bring in targeted tenants.
3. Choose the Right Location
When it comes to choosing a property, your location plays a crucial role in bringing tenant. A property that offers many benefits not just amenities but also a friendly neighbourhood, will help you find good tenants more quickly. Locations that have relatively low crime-rate, high employment rate and access to essential service easily, is appealing to tenants. Ensure that you have done all your possible research about the location and the property you will invest in.
4. Learn Landlord-Tenant Laws
Since you are searching for an investment property in Canada, you must educate yourself with the tenant laws of the country. Now that you have a rental property, you need to follow all the landlord laws to the letter so that you and your tenant is well protected. For example, before renting your house you must provide all the necessary amenities, maintenance, security procedures, tenant evictions, and so much more. Familiarizing yourself with the state and local law will keep you updated with the latest rules because most provinces in Canada have strict landlord-tenant protection polices.
5. Property Management Company
The duties of a rental property manager includes collecting rent, maintenance, repairs, and so much more. If you have a job or any other obligation that makes it difficult for you to manage your property, you can consider hiring a property management company. There are several companies that can help you manage your properties with a variety of things such as maintaining records, contracts, marketing, rent, repairs, follow-ups, etc. They also help in responding to tenant and dealing with issues related to your property investment. As much as this makes your work easier, it comes at an additional cost around 5-10% of your rental income.
The aforementioned tips will help you buy a rental property in Canada and help you build wealth from your investments.