Buying a Rental Property in Ontario
If you’re unsure of how to get started and purchase a rental property in Ontario, here are some things to consider:
What is your budget and what type of property do you want to invest in?
A rental property, just like any other residential property, requires a down payment, land transfer tax and will have closing costs associated with it.
Many first-time investment buyers start with condos or single-family homes, as they’re a good way to begin building your portfolio as a landlord, but multiplex units are more likely to be cashflow positive. You will need to account for this, as well as a commercial mortgage, but your income could be a lot higher than if you purchased a single-family home rental unit. With larger units also come more taxes and space to maintain.
If you do wish to invest in a multi-residential property, make sure to work with a real estate agent to find the right property and properly prepare for the investment.
Unexpected expenses could arise at any time. Sometimes, emergency work arises that is difficult to plan for but crucial to budget for. A few other factors to budget for are tenants that may be late with rent, or not pay at all. In some instances, it may also be difficult to find a tenant right away, so you may not be receiving income from the property for a period of time.
These are all important scenarios to take into consideration when determining your budget and the type of property to invest in.
Will you be a landlord or will you hire a property manager?
When purchasing a property, you will need to consider if you have the time and resources required to be a landlord. When buying an investment property and renting it out you automatically become one (unless you’ve already spoken to a property management company).
Choosing reliable tenants with good credit and rental history that are more likely to pay on time and not damage your property is important, but you also need to be readily available for your tenants in case of emergency. If you’re unavailable to get a job taken care of in a timely manner, this could affect not just your relationship with your current tenants, but any potential future tenants as well.
It’s worth considering these things and speaking to a property manager to discuss and understand all your options.
Explore neighbourhoods that are appealing to renters
Location is important to renters and what renters consider an appealing location is dependent on their different situations.
Some tenants will be working in and around larger cities and will be considering things like their proximity to their place of work, or a form of public transit system to get them there. Parents may look for homes that are closer to schools, while younger renters may search for a home near vibrant nightlife.
These are all things that potential tenants will consider, and by extension, you will need to consider when determining where to buy your property and what kind of tenants you ideally want in them.
Proximity to public transit and the property’s walking score is important to research before putting an offer on a home.
It’s also worth considering up-and-coming neighbourhoods. Often, homes in these areas are more affordable to purchase, giving you a chance to maximise your profits as the neighbourhood continues to develop and grow.
As the popularity of the area increases, your potential income could increase as well, or provide you an opportunity to further expand your portfolio. Remember to consider how many other rental properties there are in the area, what the job market is like and if there are any major improvement projects planned which might further increase the appeal.
Regardless of the property type or neighbourhood you choose to invest in, buying a rental property in Ontario can be a great source of income and can ultimately be as hands-on or hands-off as you’d like it to be.
