What if I told you you could buy a second house and it won’t cost you any money? Well its not exactly that easy, but owning an investment property is a lot easier than you think, and you don’t have to be part of the uber rich to do it.
Freedom 55 – Harvard Tuition – Maseratis - whatever you are dreaming about, becoming a property owner can help you get where you are going. If you have saved up a little money, or are a homeowner who has gained equity in their home thanks to the rising GTA real estate prices, you may be a perfect candidate to leverage your money and buy an investment property that pays for itself!
But its not always as easy as buy, rent, profit. There are a few things you will want to consider before you begin.
1. How will you finance it? In Ontario you need 20% down to purchase an investment property – unless this will be your principle residence, with a rental unit in it (ie.basement, duplex, etc.) which you can put as little as 5% down.
2. How much will you get? You need to know what rental rates are in the area you are looking – if housing prices are high and rental rates don’t match it may not make sense to buy in your area. Visit Settlement.org to get average rental prices and vacancy rates in your area. Or give us a call and we can help.
3. How much will it cost? Your house costs more than just your mortgage payment and an investment property is no different. While tenants may pay the rent and utilities; maintenance, repairs, vacancy, property taxes, bad tenants etc. are covered by the landlord and will all pay a toll on your profits. Know the costs, and know a good accountant who can use any expenses and losses against your income so you save on taxes.
4. How will you run it? Being a landlord can be a lot of work. Make sure you will have the time to meet the demands. We can help you with finding tenants, but there is more to the game than just renting it out. If you are not ready or able you can hire a property manager – but this will cut into your profits significantly.
5. How will I pay for it if no one is living there? In the GTA vacancy rates are an average of 2.5%. But when you are budgeting its always better to err on the side of caution. Use 5% vacancy rates to be safe, and use monthly rental rates $50-75/month less than average, and expect the unexpected in costs for maintenance and repairs. You don’t want to be in a situation where you can’t pay for your own mortgage. We work with a couple of fantastic mortgage brokers who have creative and competitive ways to finance every house and will help you out with a price range that works comfortably with your situation. Email me and I can send you their contact information.
Owning an investment property is an excellent way to diversify your portfolio and generate income. If you’ve done the mental checklist and are interested in learning more on how you can leverage a little bit of money into a lot of money give us a call 416.737.0773. We will be happy to sit down with you and determine what market, price range, and style of home that works best for you and get you on the path to building your real estate portfolio.