If you’re ready to purchase your first rental property or still on the fence asking yourself if you’re making the best decision, I am here to assure you that the choice to buy your first rental property is rarely a simple one but once you have done so, you’ll never turn back.
You’re probably asking yourself why should you listen to me, but I have purchased and sold over 10 rentals within the last year or two. I’m here to say that if I simply looked out for these particular 5 items which I will share with you, I would happen to be a much more content camper. Instead, I had to learn the difficult way, one building, and one tenant at a time.
These 5 essential items consist of:
What’s the expected profit from your rental property?
• First lets say that you’re taking a look at a duplex for $200,000
• Through your market research and also the details you obtained from your appraiser, you have determined that the current market rents for your region are X.
• Next you should have received a pro-forma associated with expense for the building consisting of the mortgage, insurance coverage estimate, property tax amount, utilities (in the event the renter isn’t having to pay them) and the property management expenditures.
• Your goal is to have this building placing Excellent Cashflow in your wallet from the first day.
• Not all areas are capable of supporting the rent necessary to cover the mortgage and the costs. My suggestion, don’t purchase within the areas where you know that this will not necessarily work. You are looking at places where you can have favourable cash flow, in the end you’re in this to generate income right?
Choose a neighborhood with lower vacancy rates compared to the remainder of the city.
• From my personal experience, it’s best if you look to invest in a rental home inside a healthier community. There are a handful of factors behind this; one is that you’ll be thinking about a greater rental payment as well as 2, the vacancy rates usually are lower.
Take your time in choosing a qualified tenant.
Taking your time and efforts to choose the right tenant will help you decrease risks in the foreseeable future. An even better qualified tenant also means reduced expenses along with problems as time goes on available for you, the owner.
For your first apartment or two, the house that you purchase ought to be in move-in condition.
• Since you will be active in making sure a home is completely leased out when you take control of it, the best thing that can be done is purchase a unit that’s move-in ready. Now I am not including the small work which includes making cosmetic adjustments for example cleaning or maybe painting a room or two nevertheless the changes should not include things like major fixes.
Purchase low and sell HIGH – continually be on the look out for properties that are listed under the current market price.
• Low sale price does not always mean low value or even low rents
• How do you find these types of deals? Ask. Ask every person you know. Take time to get acquainted with the location you are looking for.
• Be on the look out for pre-foreclosures, foreclosures, as well as homes that have been on the market for a year.
Ok now what do you do? Go obtain a rental unit naturally. Still need assistance figuring out what you can manage? Try out our handy mortgage calculator canada that can assist you calculate payment choices, schedule of payments and much more. Also, follow FamilyLending.ca on Twitter and facebook!