Mar 09, 2023
What You Need To Know Before Investing in Rental Properties
Are you considering becoming a landlord and renting out your property? If so, it’s important to understand the different steps involved in successfully managing a rental property. Renting out a property can be an exciting venture but also comes with certain risks and responsibilities that must be considered before taking the plunge. From understanding financing options to creating budgets, setting up leases and dealing with tenant disputes, there are many elements of owning and managing rental properties that need to be taken into account. In this blog post we will discuss key tips for helping make sure your real estate investment is managed properly from start to finish.
Research the local market and rental properties rates
Investing in real estate is a great way to secure financial stability for the future. However, it is important to do your due diligence before investing in a rental property. Researching the local market and rental rates will help you gauge whether now is the ideal time to invest or if perhaps you should wait until the market conditions improve. Enlist the servers of a real estate agent or advisor who knows the local market and current market conditions. It’s ideal if this person also understands the rental market as well as the buying and selling market. Will you have rental income or will you need to contribute to the mortgage and plan for a longer term capital gain? Set realistic expectations regarding income generation and more accurately project how much money can be made off of your property in the short and long term. Ultimately, this will help you determine if renting out a property is the right fit for you.
Calculate potential profits and losses
Further to researching the local market, deep diving the numbers is critical before making a decision on investing in real estate. Doing so will help outline expectations and lessen the likelihood of experiencing financial difficulties. It is important to consider expenses such as taxes, insurance costs and any repair or upkeep fees associated with the property. In Vancouver, there are also Strata Fees (building fees) that vary based on the building you choose. Be sure to research your local market to determine how much rent can be expected or if there is a history of renting in the area. Understanding these factors can go a long way in ensuring that rental investments are properly executed, providing great returns while limiting potential pitfalls along the way.
Consider legalities such as zoning laws and taxes
When it comes to effectively managing a rental property, it is essential that all legal aspects of renting be taken into account. Landlords should familiarize themselves with local laws in regards to rentals, income generation, and more, as they dictate what type of use is permissible on each property. Property taxes will also need to be considered in your budget. Securing appropriate insurance, especially in Vancouver, is an absolute necessity. Speak to an insurance broker prior to making a real estate investment.
Get an inspection to check for any structural or pest issues
Having a regular inspection of your rental property can be highly beneficial to landlords and tenants alike. It allows any structural issues such as leaks or faulty wiring to be identified and fixed before they become more serious problems. Doing this can help ensure that the property is in a safe, habitable condition for the tenant, ultimately providing great peace of mind both for them and the landlord. An inspection also includes checking for signs of any pest infestations, reducing the chances of an unwanted guest making your property their home. A comprehensive inspection is one of the key steps prior to purchasing a rental property.
Estimate ongoing expenses
Estimating ongoing expenses for a rental property is a critical part of the decision making process. These expenses may include maintenance, utilities and repairs, as well as matters such as insurance, taxes and administration/management fees. In addition to this, future modifications or expansion of the rental property to make it more attractive may be costs that need to be factored into budgeting. Planning for these expenses will help you with calculating your potential profits and losses (above) and ensuring you have enough money on hand when big expenses arise, avoiding any surprises during your ownership of the property.
Look into financing options
Financing options are of course another crucial aspect of purchasing a rental property. It is important to make sure that you look into all available options for financing such as mortgages and loans. Factors such as your credit score, income, and current debt obligations will determine which option is best suited for you. To get started, talk to your bank or lender about their recommended financing option and do research online as well. Ask friends or family for a referral if possible. Become well-informed and have a better understanding of the different types of mortgages and loans available to you before making a decision.
Develop a plan for finding tenants
The process of finding tenants and managing a rental property successfully can be overwhelming. Creating a well-conceived plan helps you stay organized and in control throughout the process. For starters, decide on the necessary background checks you want to conduct on prospective tenants, then determine your ideal tenant profile from there. Before beginning your search, check local laws to ensure that all statutory requirements for renting a property are met. Developing an agreement outlining key details such as payment terms, lease duration, rules and regulations etc., is also essential for successful management of the rental property. Speak to a specialist or lawyer about leases to understand what will be best for your situation.
How to handle tenant disputes or evictions
As a landlord, it’s important to understand laws and procedures related to tenant disputes or evictions. Understanding the specific rights of both tenant and property owner in your jurisdiction will help you make informed decisions about how to approach these issues should they arise in the future. As with creating a lease, it is wise to consult an attorney familiar with the relevant housing laws, as they may be able to provide valuable advice and assistance should a dispute or eviction be necessary. Additionally, having clear rental policies listed in rental agreements can help preemptively avert issues that might otherwise require more elevated responses.
Create a budget to track income and expenses
Creating a budget to track income and expenses associated with a rental property is an important step in owning and managing the property. Keeping track of your rental income, expenses, payment due dates, and amounts can help ensure that you properly manage your rental property investments. A comprehensive budget should include categories such as rental deposits, legal fees, marketing costs, mortgage payments and other necessary expenses that contribute to the efficiency of running a rental property. By taking time to create an organized budget for your investment you’ll be able to more easily understand the expenses associated with the running of the property so you can make more informed decisions about how to run it.
Still want to invest in Rental Properties?
If you would like to begin renting your property but are feeling overwhelmed by the steps involved, you may want to consider working with HighStreet Accommodations. We handle all aspects of your real estate investment and have been doing so for over 20 years. Learn about all the benefits of the Owner Vendor Program on our website, submit an application, or speak to our team directly.
