Passive income, appreciation, stability, high returns, and tax advantages are all compelling reasons to invest in long-term rental properties.
Not all rental properties are the same. If you’re looking to find the right investment property, you should know what you’re looking for, as well as what your prospective tenants are looking for.
Here are the five items you should prioritize on your checklist when you consider buying a rental investment property.
An Appealing Location
Because “location, location, location” is so crucial, everyone is always talking about it. A good location is essential for achieving a good return on your investment. It impacts the amount of rent you receive, the calibre of your tenants, and the vacancy rate you are likely to encounter.
When it comes to hold-and-rent properties, a community with plenty of amenities is your best chance. Good schools, a flourishing job market, public transit, parks, restaurants, retail areas, post offices, medical facilities, and entertainment options are just a few of the features that will entice prospective renters to rent your property.
The safety of the area also contributes to the location’s desirability. Before you buy a home, do some research on crime patterns. Begin by calling the local law enforcement department to learn about vandalism and other minor and major crimes in the region. You should also consider whether those figures are rising or falling in order to get a sense of the long-term situation.
Reasonable Numbers
If you’re new to real estate investing, you could be tempted to pick an investment property based on your feelings. That is a classic pitfall, and you do not want to fall into it. Remember that you will not be living in this apartment. Therefore your own preferences are irrelevant; it’s the numbers that are important.
Make a financial plan before you buy, and remember that you’ll cover more than just the mortgage. You must also consider running expenditures, property taxes, and the typical vacancy rate.
When crunching the statistics, bear in mind that just because rent prices are higher in one place doesn’t imply you’ll have positive cash flow at the end of the day. Take the time to analyze the true payout vs your initial investment. Often, median-priced investments with fair rent outperform high-profile rentals in terms of long-term profits.
Easy to Maintain
Some investment properties, such as holiday rentals and student rentals, need more time to manage than others. Properties in low-quality regions that are in poor condition and require frequent maintenance calls have greater turnover rates and will necessitate more effort on your side.
The homes that require the least amount of upkeep are those that attract good tenant retention. These are unlikely to be the most flashy investments on the market, which is OK. You want to be powerful and consistent, not a flash in the pan.
If you’re planning to maintain the property yourself (rather than employing a property manager), location is also important when it comes to maintenance. Check that your property is close to your home base. Otherwise, driving out there—or, worse, flying there—to deal with every minor issue that arises would quickly become a major hassle.
The Ability to Appreciate
A rental property that rises in value is a wise investment. For you as an investor, appreciation occurs on two levels: when you purchase the property and when you sell it.
When buying, consider the appreciation potential of a few aesthetic changes to the property. How much more will you be able to charge for rent after the walls have been repainted compared to what it is currently worth? You can save money on your initial investment if you’re ready to put in some work after you acquire the house.
Another consideration is how much the property will be worth when you sell it in the future. All land will appreciate slightly over time, but you want an investment that will appreciate more than the others. It goes without saying that certain places are more promising than others. However, you can take it a step further.
Consider the attraction of the property’s precise location within the greater neighbourhood (for example, being on a cul-de-sac increases value). You may also inquire with the city hall about plans to construct additional facilities, which will increase future property prices in the region.
Steady and Low Risk
Long-term, hold-to-rent real estate may be a terrific and reliable investment if done correctly. When you’re not careful, you might quickly find yourself in a high-risk position. “Smart” in the context of long-term rentals indicates “normal.” You don’t need the next TV-Worthy luxury condo to have success; what you want is a low-risk, consistent investment.
“Normal” suggests you’re searching for something practical, in good condition, and in a desirable location. A “practical” example: A three-bedroom, two-bathroom house with a standard plan that is close to schools and main job locations. Impractical? The tastefully refurbished Victorian with a backyard outhouse.
You’ll also want to know the fundamentals about who you’re renting to so that you can satisfy their basic expectations. If you’re renting to a younger demographic when marketing your property, for example, you’ll want to invest in a home with open-concept flats. If you’re looking for a retirement community, look for one that doesn’t have a lot of steps.
The bottom line in hold-to-rent real estate investing is to stick to the essentials. They aren’t thrilling, but they will lead to long-term success.
We Do the Work for You
Rental property management can take a lot of time and require a lot of effort to maintain.
While doing it yourself makes sense if you’re handy, live close, and don’t mind investing a few hours every month in the job, it’s not always feasible. Consider hiring professional tenant services to manage some of your responsibilities.
Property Management Toronto is committed to making landlord obligations simple for everyone, regardless of knowledge or experience. If you are seeking property management or investment real estate services in Ontario, don’t hesitate to get in touch with us at 416.451.9499 or info@propertymanagementto.com.