Thinking about Buying a Rental Property in Hamilton?
5 Things to Consider Before You Sign on the Dotted Line
Buying a rental property is a huge financial opportunity that comes with it’s fair share of risk and rewards. Before you jump in to the Hamilton real estate market it’s important to do your research and fully understand what you’re getting into.
Working with a real estate agent who is experienced in investment properties is a good place to start. Your agent will help you assess the market, understand the responsibilities involved and ultimately help you find the right rental property. But first, consider:
- Do you have what it takes to be a good landlord?
As a landlord you have a legal obligation to your tenants and you could be on the hook financially and legally if you don’t fulfill your responsibilities. A good landlord has:
- The time needed to be available and on call for maintenance and other emergency situations
- The money on hand required to fix and maintain their buildings
- The personality to deal fairly with a variety of people in stressful situations
- Rental properties that are close by so that they can be on hand to support tenants, protect the property and easily solve any potential problems that arise
- An understanding of their legal responsibilities
- Insurance to protect their property and themselves
If this doesn’t sound like you then consider hiring a property management company to manage your property on your behalf (but note that this will eat into your property’s income earnings).
- What is The Real Estate Market Like?
Hamilton is an up and coming real estate market, and has a number of investment opportunities available, many for under $300, 000. For many first-time investors now is a good time to buy a rental property, especially with interest rates at an all-time low.
Be prepared to take advantage of a good opportunity when it presents itself. Sometimes in a hot market a quick sale can lead to savings. But ensure that you’re always comfortable with the purchase. Don’t get rushed into a decision you will regret later.
- What is Your Financial Situation?
It’s important to understand how much money you will need to invest in the income property, how much money you can expect to make from the property and whether the property will appreciate in value over time.
According to Kurt Rosentreter, a certified financial planner at Manulife Securities Inc., “the decision to buy an income property should be based on two factors,” he tells The Globe and Mail. “Once you subtract your mortgage and operating costs, will the property generate a steady monthly income? Secondly, will it appreciate in value?”
Rosentreter warns that investment property owners with large debt loads should be weary. “If you are taking on a 20-year mortgage and interest rates hit 5 per cent, could this be a disaster for you,” he asks.
There are also a number of tax and insurance implications for rental property owners. Talk to your real estate agent, accountant or certified financial planner about the tax implications involved in owning a rental property and work these details into your budget.
- Real Estate is a Long-term Investment
It takes time to make money in real estate. If you are looking for an investment that will pay dividends quickly then real-estate might not be the right fit for you.
If you have the patience required for a real estate investment, then talk to your agent about the best up and coming areas in which to purchase a rental property. Remember to look for neighbourhoods that are:
- Close to amenities
- Close to public transport.
Consider your future plans for the property as well. A home inspection will help you decide whether the property is a good investment and your real estate agent can help you check local by-laws and zoning if you plan to add to or convert the property in the future.
- Can You Find the Right Tenants?
The right tenants can make or break an investment property owner. Protect yourself by taking the time to weed through potential applicants and identify the good from the bad.
Good tenants pay on time, respect your property and abide by the rules set out in the lease. Bad tenants damage your property, do not pay rent on time (or at all), and break their lease. Dealing with a bad tenant costs time and money. To find the right tenants, be prepared to:
- Ask for references and employment history
- Request a credit check
- Get a security deposit
- Ask tenants to commit to a long-term lease.
Your answers to the five considerations above will help you decide if a rental property is a good investment for you. If you’re considering investing in real estate talk to an experienced real estate agent who can help you work through these details and find the right rental property to invest in..
Copyright Maga Real Estate 2016