[Blog] Buying a Rental Property in Ontario
Ontario’s real estate market saw record-breaking prices during the peak of the pandemic, and many buyers are opting to make their money through investment properties. Toronto rent prices are on the rise, and it’s a similar story in surrounding areas, making a rental property a great source of income as the demand for rental units rises. Here are a few tips to consider if you’re in the market for a rental property.
Determine what your budget is and what type of property to invest in
Just like any other property, you will need to make a down payment if you’re purchasing a rental property, and budget for land transfer taxes and closing costs. Many buyers that invest in rental properties opt to begin with a condo or single-family home. These types of properties tend to be a great way to build your portfolio when you’re starting out as a landlord as they may be less involved than investing in an apartment building or larger units.
If you’re looking for something with a greater cash flow and have the funds, multiplex units can offer great returns. If you choose to go this route you will also need to consider a commercial mortgage, higher taxes and more space to maintain, but your income could be a lot higher than if you invested in a smaller unit like a single condo apartment. 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.
Plan for unexpected expenses and situations
Unexpected expenses could arise at any time. It’s important to set aside a part of the profits to account for unexpected repairs; real estate professionals suggest at least 10% of the rent price. Other things you may need to consider are tenants that are late with rent or do not pay at all, and not being able to find the right tenant when you’re ready to rent out the property. This may result in a period of time without any income from the investment property.
Will you be a landlord or will you hire a property manager?
When purchasing an investment property, the owner automatically assumes the responsibility of the landlord. This can be time-consuming and a difficult job, especially if it’s not your full-time job. Before purchasing an investment property, it's a good idea to review all your options and speak to a few property management companies. They will take a portion of the profits to be the main point of contact, but many people that have full-time jobs or are purchasing multiple investment units choose this hands-off route.
Explore neighbourhoods that are appealing to renters
Location, location, location! This is key for renters. Some prefer to be close to city centres, others need accessible public transit, and families often want to be close to schools and parks. Consider the neighbourhood you’re planning to purchase in and the tenants that will be interested in the location.
Up-and-coming neighbourhoods are also worth considering, as homes in these areas may be more affordable to purchase, giving you a chance to maximise your profits as the neighbourhoods continue to develop and grow. As the area increases in popularity, your potential income could also increase, and provide you with an opportunity to further expand your portfolio. Take into account how many other properties are available for rent in the area, what the local job market is like and any major improvement projects planned that could help increase the appeal of the area.
Proximity to public transit and the property’s walking score is essential to research before putting an offer on an investment property. Zoocasa.com provides detailed information on how easy it is to commute to and from listed properties, as well as scores for walkability and even biking as well as information about schools in the area, and the neighbourhood demographics. Sign up for a free account to learn more about the neighbourhoods you’re considering.
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. The real estate team at Zoocasa is just a call or email away and ready to help you find the perfect investment property.