If you are considering buying an investment property, there are 7 important things to consider.
1. Financing, lenders usually lend only 65% of the value of the property for investment purposes. This limit is in place because lenders consider an investment property with a higher risk
If you have equity in your current principal residence or other property, you can borrow from these sources to maximize your mortgage and financing. As a rule, your investment property. The reason for this is that you are allowed to use the mortgage interest paid on your investment property to reduce the amount of your income and hence the tax paid on your investment property.
2. Another important consideration for your real estate investment is choosing the best location. If you are planning to invest in a townhouse or condominium in a high-rise building, you need to make sure that it is located close to major shopping, transportation and schools, as well as amenities that will seduce potential tenants. Tenants often only have one vehicle and need this equipment to be located near the property. You will usually have a higher rent when your location is desirable.
3. As a general rule, a high-rise condominium will allow you more flexibility and less effort and maintenance during the lease compared to any other type of property. Once a high-rise condo is rented, it&39;s almost a hands-free investment. This is not free, as the maintenance costs associated with a condominium in a tower will be much higher than those of a townhouse or other type of property. Your second choice for a maintenance-free investment property may be a townhouse. The reason is that all exterior maintenance, such as snow removal, lawn and garden maintenance, will be taken care of by the condo company and not by the tenant. The only things that you and / or the tenant will have to look after are the interior elements, usually minor ones.
A townhouse, semi-detached house or detached house will require more maintenance and effort from the tenant throughout the year. This may be more desirable or not, depending on your situation. Many investors choose freehold properties for their investment properties because they have the time or prefer to do some of the maintenance themselves or at least have control of the entire property. property in relation to condo-type properties.
4. In the continuity of the elements considered in number 3, these different properties will be assessed at different rates, all things being equal. For example, if a high-rise condominium has a 10% increase in a year, a townhome can increase by 12 to 14% and a freehold property can increase by 15% or more. This greater appreciation would be offset by the fact that the owner may need more maintenance.
5. It is important to consider all expenses when buying an investment property. The obvious expenses are the capital and interest costs associated with the mortgage or property financing, the annual taxes and the monthly maintenance fees if the property is a condominium.
You may want to consider regular maintenance items to protect the value of your investment property and the systems associated with your property. Other expenses you may incur are regular maintenance items such as cleaning, maintenance and inspection of the boiler. This is a very important element if your investment property is in full ownership. Other elements such as the condition of the roof, foundations, interior and exterior walls and windows, appliances, lighting and window coverings, electric garage door openers and any other system or element of a mechanical nature must be checked regularly. Protect only the value of your investment, but also to avoid the failure of these elements, as opposed to regular maintenance.
6. Once you have purchased your investment property, your other major consideration is finding a good quality tenant. In almost 20 years of experience, I&39;ve found that your tenant needs to consider two important factors. The number one consideration is that you find a tenant who has the ability to pay the rent and, if possible, can show a good history of paying the rent. The second most important element is to make sure that your tenant will take care of the property for you in your absence.
You must also take into account the fact that you must check the tenant&39;s creditworthiness, personal and credit history, professional status and job confirmation. You can contact their previous owner and the personal references that they provided in the application. These elements can be critical and will give you an insight into your future tenant. From my experience, the extent to which a potential tenant fills all the fields of a rental application and provides all the information you request and is simple and straightforward, with all the answers to your questions and requests of information, will give a good indication of the quality of the tenant. you watch.
7. You must decide to find the tenant yourself or to call a real estate agent. When you try to find the agent yourself, you can personally meet the renter in advance and see the type of people who will occupy your property. You will have to do all the credit and the personal inquiries of the tenant. I&39;ve found that when you use a real estate agent to find a tenant for your property, the quality of the tenants is usually better than by private means. The reason is that tenants who move with their business or those with better jobs and personal backgrounds know that the properties on the properties are better compared to private properties and will use the properties to find their property. In addition, the rental solution is a much more efficient method to find a rental property and many tenants use it to find the next rental.
Of course, a real estate agent can find you a good quality tenant and perform all credit inquiries and personal surveys on your behalf. In Toronto and the Greater Toronto Area, the typical cost of renting your property through the vintage is a one-month rent commission.
As you can see, there are many important things to consider when buying an investment property. Your personal situation, your financial capacity and your degree of involvement in your investment property will ultimately determine the type of property you will purchase.