What is an investment property?
An investment property is real estate purchased for the purpose of generating financial returns. The property could be a house, cottage, farm, condo, or plot of land. Buying real estate is traditionally a sound and profitable investment, offering both rental income, taxation benefits and capital gains.
Investment properties are different things to different people. To some, it is a way of living in a home with minimal expense, if any. For others, it’s the little monthly income they need over and above their personal salary for car insurance, or to send their daughter to dance. For almost all, after a prolonged period of time, it’s a nest egg. You buy the home, you find the tenants, maintain the property over the years- but in the end, you have this ball of equity you can take out of the home, use it to pay off your personal mortgage, take a trip, buy another investment property, etc. The options are endless when someone else has paid down your mortgage. Speak to me and a mortgage professional today to find out how you can have an investment property working for YOU.
Most financial institutions will finance the following investment property purchases:
Rental properties, such as apartment buildings
Mixed-use properties, such as apartments with commercial spaces
Other forms of co-ownership (such as co-op, co-housing, undivided interest, and life lease)
The Canada Mortgage and Housing Corporation (CMHC) is Canada's leading provider of mortgage loan insurance for multi-unit residential buildings. With CMHC-insured loans, borrowers can obtain mortgage financing up to 85% of the value of the property without a maximum dollar amount and therefore reduce the amount of equity needed.
Before embarking on the journey to find an investment property, you MUST speak to a mortgage professional. Being prequalified = POWER.
Being a landlord
Whether you have a small apartment in your basement or want to buy and own a large high-rise, as a landlord you are subject to laws and regulations that define your responsibilities and what you can and cannot do. Since each province and territory has its own landlord and tenant legislation, make sure you know the regulations that apply in Ontario. CMHC’s collection of ‘Provincial and Territorial Fact Sheets’ is great reference material to get you started. I can provide you with additional information upon your request.
13 quick tips for renting your investment property:
1. Contact your local or municipal government to first determine if you are legally permitted to turn your home into an income property. Work with them to ensure the unit adheres to all existing building and fire codes. If we are looking into buying an existing investment property, check with the municipalities to ensure the property is legal or non-retrofit. The legality of the property will depend on the location.
2. Get to know the landlord-tenant relationship regulations in Ontario. Visit http://www.ltb.gov.on.ca for more information, regulations and guidelines. You need to know what your regulations, rules and rights are as a landlord.
3. Inform your insurance company about your plans for renting out space in your home, and ask them if you require additional coverage. Ensure you have proper coverage for the property/tenants if you are not planning on living on the property.
4. Get your home renter-ready. Whether it requires simple changes like a fresh coat of paint or major renovations, make your home look and feel as spacious, bright and comfortable as possible. Your home should look appealing inside and out in order to attract potential renters. I can help you facilitate any renovations, trades required to help get the home ready for showings. Ensure all safety standards are met (smoke detector, carbon monoxide, exhaust fans in restrooms and kitchen, etc.)
5. Price and market your unit competitively. Scan the classifieds and visit rental websites to find out how much similar units are listed for. I will provide you with pricing advice, and to help you find the right tenants through a listing.
6. Conduct a screening process for applicants. Consider running a criminal background check, as well as a credit check, on prospective tenants.
7. Draft a written tenancy agreement, using the OREA for “Agreement To Lease”. It may contain information such as the date the tenant will move into the rental unit, the rent amount, the date rent is to be paid, what services are included in the rent(such as electricity or parking) and any separate charges, as well as the rules that you require the tenant to follow. The tenant should also fill out an OREA “Rental Application” as well.
8. Consult a lawyer to look over the contract. Although not necessary, a lawyer can ensure there are no legal problems or issues with the contract before you present it to your tenant.
9. Request a minimum deposit in advance that may be used against any property damage or unpaid bills, depending on the laws in your province (First and Last are typical)
10. Have the tenant sign the agreement, and provide him or her with copies.
11. Arrange in advance the 10 remaining month payment options. My past clients have asked for 10 post dated cheques, and sometimes the monthly rent is deposited directly into the landlord’s bank account. This will depend on you, the landlord and the tenants. The last thing you want to do is go and collect the rent monthly.
12. Transfer any utilities into tenants’ names to the rental address. If any utilities are not transferable, ass the month cost to the rent to ensure full payments are made monthly. For example, in Durham Region, the water is not assignable. What I suggest, get the annual total, divide it by 12 and add it to the monthly rent and explain to the tenant why there is the monthly additional cost.
13. Every 3-6 months, visit the property to ensure the structure does not require maintenance and that the tenants are abiding my all codes and following all contractual rules stated in the “Agreement To Lease”. Ensure to provide the tenants with the required notice prior to entering property.
CENTURY 21 Leading Edge Realty Inc., Brokerage*