The condo craze in Canada’s major cities has put a dent in construction of purpose-built residential rental properties.
Yet not every person who needs a home has the financial means (particularly the down payment) required to buy.
That reality spells opportunity for investors looking to buy multifamily housing. It’s possible to purchase turnkey properties, or those in need of rehabilitation – depending on your means and business acumen.
Single-family rental properties, or rentable vacation properties that you use when they’re not tenanted, also are an option that’s within reach for many investors, especially those who own their primary residences free and clear.
But before telling your realtor to start the property search, consider these pros and cons:
- Real estate will help offset the volatility of any stocks you have in your portfolio because housing, generally, is a more stable long-term investment.
- Supply is limited, so as demand heightens, property prices will rise.
- Vacancy rates are at historic lows in most Canadian cities. If you choose a buy-rent-hold strategy, you should be able to charge premium rents.
- Rental income can be used for other investments. Alternatively, it can be used to cover maintenance costs for the property.
- Consistent renovations could, someday, help the unit sell for more.
- Mortgage interest rates remain affordable.
- If you purchase the property with your retirement goals in mind (perhaps you want a cottage or condo for your golden years), it could supplement your nest egg.
- You could lose money if you’re forced to sell during a market downturn.
- If you don’t crunch the mortgage payment, maintenance costs, and property tax numbers right, you could get in over your head.
If you’ve decided to include real estate in your portfolio, here are some tips to help you invest.
- Make sure you get investment, legal and tax advice before you buy so you know you can afford the property.
- If you’re going for a buy-rent-hold strategy, make sure to interview tenants and make updates to leases before you buy. Get new tenants to sign leases before moving in, otherwise you have no recourse to remove them under a time limit, or for bad behaviour. Check employment status and income, as well as referrals from past landlords to ensure they’re reliable.
- Invest in simple renovations over the long term. This will increase the property value in the event you eventually sell. Items like painting and installing pot lights can be done for minimal costs, and can help a home sell faster.
- Just like when you’re buying your own home, do your research. Choose a neighbourhood that’s growing and has increasing property values.