5 Important Tips To Know When Buying A Rental Property

Buying a property for investment can be financially rewarding if done the right way, even in a challenging real estate market.   

  1. How much property can you afford?
You must know what kind of money you have to work with and ascertain how much of that you want to deploy on the purchase. If you are only factoring the down payment, there are many other factors to consider: whether you are a first-time home buyer, if this is going to be your primary residence and the location of the property.  

Other elements that have to be considered for purchasing a rental property together with the down necessary payment – legal fees, land transfer taxes, insurance, a reserve fund for contingencies. If you plan to renovate, these costs have to be factored in as well.  

Once the property is up and running, a cash flow projection must be generated to determine what kind of return you can expect.   

  1. Get organized
Once you have an idea of how much property you can afford, it is time to verify that. If you are planning to use bank financing, you will have to work with a mortgage agent to find out exactly what you are qualified for. The mortgage agent will be going in depth into your financial affairs.  

Banks view investment into rental properties as higher risk, therefore the underwriting process or due diligence they perform will always be much more scrutinized, than an owner-occupied property. Therefore, it is important you have all your information well organized – e.g. where is your down payment coming from? how good your credit score/history is?  

  1. Chose the right strategy
There are many types of rental investment properties – single family dwelling, condo, duplex, a multi-family property. You need to narrow down a strategy you want to use with the rental property. The type of strategy you decide upon should mirror your investing goals.  

If you are focusing on cash flow, then a single-family dwelling with a long-term tenant will not be appropriate; this would work if you want to build equity.  

  1. Choose a market
When looking for a rental property don’t be influenced by choosing a neighborhood that you would like to live in, as it may turn out to be more expensive and costly to maintain. Instead, a cheaper property in a modest neighborhood may fare better.  

Areas that have few vacant properties, located near amenities such as schools and shopping centres, with a high percentage of employment would be ideal. Purchasing a property far from your present location makes sense if you plan on working with a property management company.  

  1. Build a team
Members of your team who are going to be vital for your success are a good lawyer, mortgage agent, real estate agent, property management company, contractor, insurance broker and home inspector.  

A good way of finding qualified service professionals is by getting recommendations from fellow investors who are investing in the same market.  

We have several excellent investment properties available for sale. Visit our website or, contact us to book a consultation.
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