Approximately one in 20 Canadians owns a rental property ; among households with an annual income of over $100,000, rental-property ownership jumps to 10%. Investment property owners are motivated by a variety of factors, which may include:
• Building wealth: Real estate values tend to appreciate over time, so, for many homeowners, owning a secondary property is a solid long-term investment strategy;
• Diversifying income: In the shorter term, renting out that secondary property will add an additional income stream each month;
• Boosting affordability: For some homeowners, having an income suite in their primary residence allows them to afford a larger mortgage and “more” home, especially in competitive real estate markets.
For the reasons above, property investment may sound like an obvious opportunity. But, the reality is, while it has the potential to be highly rewarding, it’s not for everyone.
Here are three things to consider before taking the next step:
Being a landlord isn’t about sitting back and collecting those rent checks! Owning an investment property is a job that entails weekly, seasonal, and emergency property maintenance (indoors and out!), accounting, tenant screening (credit check, background check) and more.
You’ll be using soft skills like negotiation, communication, and conflict resolution, as well as hard skills like math and reading; plus, if you want to save on labour costs, additional technical skills like basic carpentry, plumbing, electrical and landscaping are beneficial.
Being a landlord means working odd hours, too. If your tenant’s kitchen pipe bursts at 1 a.m. on a weeknight, you’re the one they’ll be calling.
Take your basic homeownership chores and multiply them if you own a rental unit. From raking leaves, to getting the trash curbside, shoveling the walkway, to fixing that broken porch light, it’s all on you to tackle. And within a reasonable timeframe, because you’ve got paying customers to keep happy, not to mention municipal bylaws and provincial residential tenancy regulations to follow.
Some investment property owners hire a property manager (or delegate these chores to a tenant in return for a rental discount), which can net you more free time, but a little less income.
Finally, consider that while real estate appreciation is a general economic trend, regional disparities mean increasing property values are NOT guaranteed, particularly in the short term.
Hot markets like the Greater Toronto and Greater Vancouver areas, Ottawa and Montreal have all seen steady housing value gains, while local markets within the Prairies and Newfoundland have been far less predictable. Besides regional real estate markets, other risk factors include the impact tenants may have on your property value, such as basic versus extreme wear and tear, or the potential for tenants to default on rent payments.
Although no one wants to focus on worst-case scenarios, thinking out all the “what-ifs” can help you decide if investment ownership is right for you. Check out landlord communities and support groups online, to read about the ins and outs of this profession.
If you’re looking to build for your retirement (or to create a part-time job during a semi-retirement), diversify your monthly income stream, or boost affordability for your first home, property investing might be right for you. If so, 8Twelve Mortgage’s team of mortgage brokers can help you compare the different mortgage products out there for Canadians interested in property investing, including:
• The best mortgages for secondary homes,
• Renovation financing and purchase plus improvements products to get your income suite or secondary property ready to rent;
• HELOC mortgage, reverse mortgage and mortgage renewal options that can help you fund a down payment on a second property.
Ready to unlock the door to investment ownership? Contact 8Twelve’s Mortgage Strategists today.