Thinking about becoming a landlord in Canada? Consider these 6 things
1. Secure Financing
Securing financing for a future rental property is important because it will give you the range of prices that you have to work with. There are many ways you can choose finance a rental property purchase including:
- taking out a mortgage through a bank, credit union or mortgage broker
- a line of credit on your existing property or
- getting together with a friend or family member to make the purchase.
Each method of financing can have it’s pros and cons so it’s also wise to talk with a tax professional about implications and costs of financing.
2. Get Landlord Insurance
Speaking with a licensed insurance professional is important. You should be discussing the type of tenants you will be having i.e. if you plan on renting to students, families or unrelated individuals. You should also be prepared to describe your property attributes such as square footage, construction, heating, electrical, plumbing, roof and other things that your property has. It is also important once you are running, to make aware to your insurance provider any changes in tenancy, vacancies or other updates before they happen.
3. Look which areas you want to invest in
Every neighborhood is unique. By purchasing a property in Hamilton close to McMaster university, your property may attract student rental tenants. Whereas, purchasing a condo in downtown Toronto can attract younger professionals looking to live close to work. All of these factors will also be an important aspect of rents you can collect, turnover, upkeep and future gains on the property.
4. Do the math
Making a simple spreadsheet to go over all the costs and revenue to make sure you break even or make a profit is important. Many landlords can find themselves having to put excess money in when the costs are too high, which can make for a risky endeavor. What’s important is that you feel comfortable about carrying costs while owning the rental property.
5. Know the rules
Did you know that in the province of Ontario, as a landlord you are responsible for things like snow removal and grass cutting? These things may surprise first time landlords and it is important to check with your provincial landlord-tenancy government office what your rights and responsibilities are of being a landlord. Every province has different rules and procedures for dealing with things like late payment of rent, lease violations, house maintenance issues among other situations. This is why it is important to speak with your local government, lawyer or paralegal about these things so you know where you stand as a landlord.
6. Be prepared for the unexpected
Being able to handle repairs, maintenance and other situations that may come up is very important. Only time will tell what can happen but it is important to be prepared and have contingency plans, speaking with or hiring a professional property manager can also be a good idea.