Ever dreamed of owning an income property? Whether it’s a renter's apartment in your basement or a condo unit, there are benefits to having rental properties, including a steady income and rising property values. But there are some definite challenges and you need to make sure you have what it takes to step into the market. Here are four important questions to ask yourself:
1. Can you charge enough rent to cover your costs?
Checking out other rental properties in your neighbourhood on sites like Kijiji and Craigslist will give you a good idea of how much rent you can reasonably charge for your property. Based on that, you also need to factor in the cost of heat, hydro, upkeep, taxes and, of course, your mortgage payments. If the rent won’t cover those basic costs, then this might not be a good investment for you.
2. Will you be able to handle the surprises?
From bounced rent cheques to property damage, being a landlord can come with some unpleasant surprises. You need to make sure you can afford to cover the costs if these problems arise. A solid emergency fund is key to helping you make it through the tough spots. Note: And if you want to evict a problem tenant, it can actually take a long time to get that tenant out your door.
3. Do you know the risks?
A lot of economists are saying that some real estate markets in Canada are overvalued. And while we’ve yet to see a major price crash, most agree that we aren’t going to see values rise as steeply as they have in the past — in fact, they could very well fall. This isn’t a big risk if you’re in the market for the long haul. But if you do end up having to sell in a bad market, then you could end up losing money.
4. Are you ready to be on call 24/7?
If a water pipe breaks at 3 am, who’s your tenant going to call? You, of course. Or if your tenant gets locked out of their house? Guess whose responsibility is to let them in? Since it’s your property, it’s your job to deal with repairs and crises when they happen. So if that’s not your style, then being a landlord might not be for you.