If you’re considering getting into the Toronto Real Estate market by owning rental properties, there is no time like now! The rental markets continue to flourish, and demand is at an all-time high. There are record numbers of people moving into the downtown core to start life in the city, and many of them are looking for good rentals and good landlords.
And rental properties have many financial advantages that are sure to work for you, setting you up for a successful future as a property owner. Property appreciation, having someone pay off your mortgage for you, and setting you up for a nice future with passive income are some of the many advantages you’ll realize.
Why You Should Invest in a Rental Property
There are many reasons why owning a rental property and becoming a landlord could be the first step to a secure financial future. Once you own rental properties and have found tenants, you’ll be set to reap the many benefits.
One of the biggest benefits is your rental income can pay down your mortgage. If you’re a first-time buyer or a seasoned investor, this will always be one of the biggest advantages to leveraging your assets to purchase a rental property. The debt that you undertake when you take out a mortgage to buy a rental property can be covered by your income from rent if you plan things properly. And you’ll be left with money to spare which means a positive cash flow – something you should be strategizing for when planning your rental property purchase.
Property appreciation is also one of the most significant benefits of owning a rental property. If you purchase a property that’s close to TTC access, in the downtown core and in a desirable area among millennials you’ll find tenants quickly. And if you are selective about your renters and keep your property looking good you are likely to enjoy the wonderful benefits of property appreciation.
Tax Deductions
As a landlord, you will be able to write-off numerous different expenses on your taxes. These will depend on your province, so make sure to check with your accountant for exact details, but this is another major benefit to becoming a landlord.
Some examples include:
Property taxes
Legal and professional fees
Maintenance repairs
Insurance
Interest on your mortgage for the property
Guide to Selecting a Successful Rental Property
Becoming a successful rental property investor is not a quick and easy process. Your realtor can help you create a strategy for success, and aid in financial projections. They can also assist in showing you a variety of properties and weighing the pros and cons of each.
We’ve helped many clients purchase investment properties that have turned into rentals, and there are a few things we always keep in mind.
Location Rental Demand
Look for locations where there is significant demand among renters in up and coming neighbourhoods that are seeing growth. A condo or home that’s within walking distance to the TTC, grocery stores, boutique gyms, cafes and restaurants will have greater value. These are all things renters will always be looking for so premium access will secure you renters for many years to come.
Property taxes
Obtain the necessary property tax information for prospective properties. Also think carefully about and try to calculate how increases in property taxes could potentially interfere with your return on investment in the future. If you decide to buy a rental property that will have high property taxes, you need to make sure that it will allow you to charge enough rent and have a consistent supply of good tenants so that you still be left with a profit.
Condo Rental Properties
If you’re entirely new to rental property investment, the best way to start out might be to buy a condo to rent out. This way, you will only have one tenant and one property to deal with and monitor. For an inexperienced landlord, having more than one property might lead to inadequate management. Condos in the downtown core are always highly sought-after – especially new build properties so also look at pre-construction investing as a more lucrative option.
Property Inspections
A critical step in the buying process is inspections. You don’t want to purchase a property that may look good on the outside but ends up being a headache for you. If you’re purchasing a home, always get a property inspection. And if you’re looking at a condo as we recommend, it’s vital to examine the building status certificate. You don’t want to find out later that the building has huge debt and your condo fees are set to sky rocket. This will eat into your profit and cause a huge amount of unwanted stress.
Inherited tenants
If you’re purchasing a property that already has tenants you may want to inherit them. So, find out about them to ensure that they will be trustworthy. You should be able to obtain all of their information (found in their rental applications and, for example, background checks) from the current owner.
Watch Your Return on Investment
As a prospective rental property investor, your primary focus must be return on investment. Doing your research and due diligence and following the tips above will help you ensure that you consistently make a profit from your properties, and keeping your eye on the market will allow you to sell your unit if you need to, for a positive return.
If after reading this you’re excited to get into the game, contact the team at TRB so we can help you find the right property in the right location, and the right tenants.
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