So you have thought about it and have decided the way to make money is to purchase a property and become a landlord! Sounds like an easy way to make a passive income? Before becoming a Landlord there are a few points to consider.
Do you have the time available?
Duties of a Landlord take up a lot of time and effort. Even if you decide to appoint a management agency to manage most of it for you, there will always be requests for repairs, lease agreements etc. If you decide not to pay the management fees (which can be as much as 10%) of the rent then you must have even more time available.
Being a Landlord should be treated like running a business .It needs to be taken seriously.
Evaluate your Financial Resources
The idea of someone else helping to pay off your mortgage is appealing. However you must look into your finances carefully before deciding to buy a property with the sole aspect to rent out as an investment.
Take into account that in terms of Canadian Law the banks will require a 20 % down payment to qualify for a loan. This is where small rental properties between 1 and 4 units are being purchased for financial gain and not your primary property.
Make sure you are familiar with the tax laws in Canada and that you will declare the income from the rental. In addition you should be aware of which items you can get a tax benefit from when you are a landlord.
It is vitally important that you put aside at least 2 % of the purchase price for any additional costs that may arise.
The cash flow for your “rent” business must be in a positive cash flow from day one.
Know your local regulations
Research and be aware of local regulations pertaining to a landlord’s responsibility. Each province in Canada has their own regulations regarding rentals. For example in Ontario you can’t collect a security deposit but in most other areas you can collect deposits for security and rental.
This can be the most trying part of being a landlord. It is a good idea to research the area you intend to rent out in. An area that has little rental stock is advantageous as you will have a large pool of tenants to choose from. Make sure to get references and if possible arrange a credit check.
This is one of the most important things to consider when deciding to rent out a property or even your basement. Care and thought must be given to your rental goals. Is it for a quick flip on the market after upgrading the property or do you want to hold onto the property and sell close to retirement providing a nest egg?
Finally if you are prepared to put in the time, thought and effort into renting out your property then you will reap all the positive benefits of becoming a Landlord.