Should I Buy an Investment Property? 6 Things to Consider
Last updated on December 23rd, 2021 at 02:13 pm
Buying a home is a lifelong dream and accomplishment for many Canadians. In addition to buying a home to live in, many are choosing to buy an investment property to provide a steady flow of rental income, then proceeding to cash in as the property appreciates over time. Whether you would like to buy a single-family home, duplex, triplex, or apartment building, rental properties can be a smart investment.
For example, buying a triplex near Carleton University or the University of Ottawa could bring in enough money each month to pay for expenses in that building and your home. Or you could purchase a single-family home in Westboro or the Civic Hospital area, then rent it out to an executive or diplomatic family for a steady income. However, buying an investment property isn’t for everyone, as you have to deal with tenants, maintenance duties, and unexpected expenses.
Let’s Get One Thing Out of the Way First: What is an Investment Property, Precisely?
An investment property is a home, complex, or other piece of property that is acquired with the intention of using it to gain a return on one’s own investment. Put another way, when you buy or put money into an investment property, you’re not necessarily concerned with living in or otherwise using the property yourself. Instead, it’s treated almost like a business as an investment should act as a source of income in order to be viable. This can involve leasing, selling, renting, or otherwise using the property as a vehicle to drive up a profit for yourself.
Investment properties are sometimes conflated with quick property sales or “house flipping,” which is the custom of quickly buying, renovating, and selling a home with the goal to turn the quickest, biggest profit possible. However, in this context, we’re talking about buying a home in order to benefit from the monthly rental income.
So, Should You Buy an Investment Property?
That probably depends upon your interests and expectations. House flipping is a very controversial subject among those in the know economically and otherwise, and so while the “quick investment, quick reward” aspect may seem alluring, it probably behooves you to do an extensive amount of research before deciding. Talk to the Geoff & Bobbie team and we’ll help you make the right decision for your current and future needs. For example, it may make sense for you to dip your toes in the market by buying a single apartment or condo as an investment property.
On the “flip” side, investing in properties that can be rented on a more long-term, sustainable basis may be the more solid choice. As stated, it’s harder for many to buy homes now than it has been in the past few decades. Also consider that there are plenty of university students looking for good, affordable apartments tor rent and diplomats seeking reliable short-term housing options in Ottawa. The market for properly managed investment properties becomes apparent.
Tips on Property Investments and Management
Are You Landlord Material?
Being a landlord isn’t a sit-back-and-kick-back sort of job. Your tenants rely on you to maintain a safe, inviting, and clean property when it comes to shared spaces and the exterior. In addition, if something essential needs fixing like the heating, air conditioning, roof, plumbing, electrical, or otherwise, you need to be able to resolve the issues appropriately. Otherwise, you risk losing tenants, and if you’re charging sky-high rent this can mean not easily getting new renters. There’s nothing wrong with not being landlord material – it’s better to accept this before diving in – but there could be serious issues ahead if you bite off more than you can chew.
Be Financially Prepared
You also need to be responsible financially. Utility payments for anything not included with rent, snow removal expenses if you’re older or have a massive parking area to look after, and any fees associated with bylaws or otherwise need to be accounted for – literally! Landlords who don’t look after their investment properties and those who call them home are what give the title a bad name – don’t be one of them!
Consider Charging Below the So-Called “Standard” for Rent
Renting in Ottawa is anything but affordable for most people, with average monthly rates being higher than ever before utilities. Instead, consider investing in a property that costs less but can accommodate for at least three units rather than one or two. That way, you can charge a bit less for rent and still be able to generate income, and the amount you owe on the building should be less initially as well. This income generated from rents can be put towards mortgage payments, maintenance costs, renovations, and otherwise.
Put Your Tenants First
Charging reasonable rents that everyday folks can actually afford is also an excellent way to retain some seriously wonderful and friendly tenants who appreciate your efforts, and they might even be less picky compared to those who pay double the price for the same square footage (understandably so either way). Ottawa is a city tragically short on affordable housing and there’s a negative stigma in place about renters. As it turns out, plenty of folks prefer to rent than purchase a home or compromise on quality living due to having little in the way of substantial savings. Prove the rumour mill wrong and make your property investment an opportunity for someone to have a well-appointed, clean, and safe new place to call home!
Want to learn more about property investment opportunities in the National Capital Region? Speak with a real estate agent from the Geoff & Bobbie team to discuss your options! We’re happy to help you find the right property for your needs and budget.