Many of my clients wonder about owning revenue property. If you have equity built up in your home, this may be something you are considering too! Real estate is one of the few investments where you can borrow based on VALUE rather than physical cash!
If this is something that has crossed your mind let me go over a few checkpoints that I discuss routinely with my clients before we go on a search for the perfect income generating property.
- If this is your first revenue property you might find it advantageous to buy near your own home. The convenience of being able to drive by and check on your property can help with your peace of mind, and should you get that call from your tenant saying the toilet has stopped working, it’s a quick pop over to assess the damage. To ensure that you are prepared for ongoing repairs it is very important to work out the ‘cap rate’ on your house to determine what price you can pay to buy the home versus how much you can ask for rent. I have a formula for this, so just ask if you would like to know!
- Each dwelling is commonly referred to as a “Door”. So, if you purchase a unit in a condominium building then that’s one ‘door’. If you buy a duplex that is an up/down or side by side that can house two families then that is 2 ‘doors’. Depending on your budget you may want to consider purchasing as many doors as possible in one dwelling unit. Many investors start with a condo unit, but then may branch off into a duplex, 4-plex or six-plex. The more doors you own, the more income you can look forward to.
- Know WHO is going to purchase and own your investments! It is VERY important it to speak to an accountant to understand whether a revenue property should go in your personal name or corporate name and any tax implications that can affect your investment.
- Becoming a Landlord can be a big road block to potential owners. I get it! The horror stories around bad tenants, vacant properties, tax implications etc. Whenever we try something for the first time it can shake our nerves. But, just like starting any kind of business, investing in your own revenue properties is something to be researched, learned about, and it is of utmost importance to get professional help. An ideal resource is the Alberta Landlord’s Association ( http://albertalandlords.ca/) and whenever my clients think about moving on to this next step of property ownership, I consider it my responsibility to guide them with my own years of experience and expertise.
- If you think you might have enough equity in your primary residence, the first step would be to call your mortgage broker and have them go over the numbers you would need to invest. There are different benchmarks for revenue properties so find out the details before you start looking for new homes. If you need any recommendations, I am here to help!
I have owned several rental properties over the last seventeen years and if you are wondering what becoming an investor might look like for you, let’s sit down and chat over coffee.
Connect with me today, about your real estate needs for tomorrow ~