Becoming a landlord for the first time can be both exciting and challenging. Here are some important things to consider before purchasing your first rental property:
1. Location
Research the neighbourhood thoroughly. Consider factors like current rental prices, safety, schools, amenities, and proximity to public transportation. It is important before making an offer on a property that the numbers are cash-flow positive. Are the house expenses covered by the rental income? It is ideal as a property investor that the property be cash flowing, giving you passive income each month.
2. Leased or Vacant?
Although there are positives and negatives to both situations, we prefer for properties to be vacant on purchase. If the property is leased, you are required to assume the current lease agreements in place, which may be under market value.
If you decide to proceed with a leased property, thoroughly examine the existing leases with the current landlord and gather as much information about the tenants as possible. Request financial documentation to confirm that the tenants are up-to-date on payments, and ensure there are no ongoing Landlord-Tenant Board issues or litigation between the seller and tenants, as these issues may be transferred to the new owner.
3. Zoning
Ensure the property's zoning is reflective of what is being advertised on the listing. This is especially important for multi-family and commercial properties. If purchasing a commercial property, additional charges may apply such as HST that you will want to be prepared for. Be sure to connect with your real estate lawyer to understand your obligations before placing an offer.
4. Property Inspections
Property Inspections are extremely important, especially if the house is tenanted. It is harder to complete repairs - whether small or large - when a tenant is living in the property. As a first-time landlord, it's easiest to find a turn-key property that requires little to no repairs if the property is leased on purchase. If the property requires repairs and you intent to complete the BRRRR method (Buy-Rehab-Rent-Refinance-Repeat), for example, you'll want to make sure the property is vacant.
5. Landlord Tenant Board & Laws
Familiarize yourself with your applicable landlord-tenant laws before looking at properties. It is important to understand your rights and responsibilities as a landlord before investing.
Remember, being a landlord requires ongoing learning and adaptability. It is important to stay informed about changes in the real estate market and landlord-tenant laws to ensure a successful and profitable rental property investment. Consider hiring a property management company to help make this new responsibility as smooth as possible.
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