Three Must-Haves Before Buying A Property For Rental Income

Buying a property for rental income

Buying a property for rental income is a profitable investment strategy that is been working for years especially in GTA where the immigrant influx has been consistently high and only growing. Research shows that the new immigrants arriving in Canada prefer to initially settle in areas where they have easy and short access to commute / transport, schools and community centers (including religious centers e.g. mosque, churches and temples) for frequent social interaction. Above all, buying a property for rental income comes with numerous lucrative benefits such as:

Low tax payment: As you could always deduct some expenses from your income if you include them in your rent e.g. mortgage interest, property taxes, insurance, maintenance / upgrades, property management and even utility bills. This will reduce the taxes that you owe.

Deduction of losses for tax: Say, if your expenses are greater than your rental income, you may be able to deduct that loss from any other income source that you have which could drastically reduce your total tax bill.

Monthly, sustained income: Wow! Someone else paying all or most of your monthly mortgage; what more one could ask for? Even more so, your monthly rent is a regular income that is sustained and uninterrupted as long you have your property on rent.

However, you must also remember that no investment must be done without doing due research. Before you put your thoughts into action, here are the five key factors that you must know and consider before buying a property for rental investment purposes:


Three Must-Haves Before Buying A Property For Rental Income 

1- Do you have sufficient down payment?
Remember, as per Canada’s current mortgage regulations, you need a down payment of at least 20% (for 2nd mortgage) when you buy a second property for rental purposes holding one to four units. Therefore, have your horses ready to finance the purchase. This, of course, is not to worry about if you are paying all in cash or have enough down payments. 

2- Would you be able to manage your property?
Of course, you are going to be the landlord for your own land and it will be your responsibility to manage it consistently and ensure you provide timely assistance and services to your tenants. You certainly do not need to take a course in “property management” to be a good land lord. All you need to do is observe your responsibility and establish good relationship and communication with your tenant. You may also want to allocate and reserve certain budget for repair and maintenance that may arise from time to time. If your office or residence is not far from your rental property, this will present an ideal scenario for you to look after your property. Last but not the least, be ready to receive emergency calls even though only occasionally in most cases. 

3- Check the Vacancy rate
Do you know, as per the statistics of Canada Mortgage and Housing Corporation (CMHC), the average vacancy rate in at least 35 main cities of Canada is about 2.5%. This simply means that the percentage of all apartment and houses that are vacant and available for rent in a city during a given period of time. It actually shows the balance between supply and demand for rental properties. Higher the rate; more is the availability for rent than what people actually need. A high vacancy rate means there are more housing units available for rent than people need. A low vacancy rate means there are more people that need rental housing than there are units available. What this means there could be times when your property will be without a tenant and while you search for a new tenant, you should have enough patience and reserved budget to pay the property bills, taxes, costs. If you are in GTA, particularly in Peel, Durham and York region, you will have good chances that your property will soon be rented out. 

All in all, buying a property for rental income is a good idea especially if you live in GTA. If you are committed, could treat it as a second job and have resources to afford a second mortgage. I could help you get some of the best deals based on my credible, in-depth research and prudence. Contact me now for free consultation with no obligations whatsoever. 

Source - Email from fellow Realtor Syed Ikram Abidi

Taha Burhani

Taha Burhani

Sales Representative
CENTURY 21 Innovative Realty Inc., Brokerage*
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