Are you thinking of buying an investment property? There are many things to consider when buying income-producing properties, and it’s important to do your homework!
Here are some things to keep in mind before you begin your search.
Finances
Did you know that qualifying for an investment property mortgage isn’t the same as qualifying for the mortgage you would borrow for your primary residence? Unlike the minimum down payment you have to make on a home that serves as your primary residence (5%), the minimum down payment you will have to make on an investment property is 20%. In addition, the “20% rule” for CMHC insurance does not apply to investment property mortgages, which means you have to purchase CMHC insurance whether you put 20% down or not. [Learn More]
Understand the Residential Tenancies Act of Ontario (RTA)
With great power comes great responsibility! As a landlord, you’re going to have extra responsibilities, and you must become acquainted with, understand, & respect the Residential Tenancies Act of Ontario (RTA).
Enjoy Being a “Handyman”
When you become a landlord, you are responsible for making repairs. It’s important to have enough savings on hand to handle any unexpected repairs and expenses. This means you may have to deal with late night phone calls when there’s a plumbing disaster!
If you don’t feel as if you can deal with these problems on your own, you can hire a property manager/management company to take care of everything – keep in mind that this can eat up around 10% of the monthly rent.
Income Variance
Unfortunately, there’s no pause button on bill payments. Tenants will come and go, and it may take a while to rent out a newly vacated unit – especially if it needs substantial repairs or refurbishing, reducing your income. You will still have to pay all bills, including the mortgage, property taxes and insurance.
Start Small
Purchasing an investment property can be overwhelming, but it can also be a fantastic way to invest your money and generate income when you’re ready for this big step.
Larger properties can present bigger challenges. Consider starting small – purchase a single apartment, condo, or duplex for example. This can help you get grounded in the idea of investing in real estate and decide whether it’s the right step for you!
As an experienced REALTOR®, I can help guide you through every step of this exciting and enjoyable process! Contact me today!
References:
The Ottawa Citizen: http://ottawacitizen.com/life/homes/advice-from-a-realtor-buying-investment-property-do-your-homework
RateHub: https://www.ratehub.ca/blog/what-potential-buyers-need-to-know-about-investment-property-mortgages/
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