Buying a rental property is a common way for many people to supplement their income and help pay off their mortgage. In Niagara, we are lucky to have Niagara College and Brock University, which bring in many students every year. Those students need somewhere to live, and student rentals are common in the area. In addition to student rentals, there are many other residents who also rent that keep up the demand for rental properties.
If you are thinking about buying a home for profit and getting in on the investment property industry, there are some things you’ll need to know first.
The Benefits of Buying a Rental Property
Some people are hesitant to allow other people to live in their house, as it does come with some risk and responsibility. However, there are many added benefits to a rental investment property.
Firstly, the biggest and most obvious benefit is that you have some extra income coming in each month. In many instances, this extra income can cover your mortgage payments and help you feel more financially secure. Secondly, this is also a great way to hold a property for your future. For example, some people who own rental homes have plans to downsize and retire to those homes in the future. When they decide to sell their current home and move in, they will have more money in their pocket because they already own their retirement home. In the meantime, it brings in income until they are ready.
Taxes and Finances
Owning a rental property means you have some extra income coming in that you will need to declare on your taxes. However, since it is an income, you are also able to deduct certain expenses for the property, such as maintenance, property management, or even utilities. In some cases, you could qualify for the Ontario Rental Housing Rebate, which comes with a maximum of $24,000 per qualifying rental unit.
Landlord Rights and Responsibilities
In Ontario, the Landlord and Tenant Act sets out a lot of different rules and regulations for both landlords and tenants. Make sure you are well versed in these laws so you fully understand what you legally can and cannot do. If a dispute occurs between you and your tenant, the Landlord and Tenant Board of Ontario is available for conflict resolution. However, it is best to be proactive and understand your legal duties.
Finding The Right Rental Property
Buying a home for profit means doing some extra research. You’ll need to think about location and the market demand for rental housing, as well as many other elements that could affect the future.
Here are some questions to ask yourself:
- Is the rental market high where you are looking?
- Are you choosing a student rental or a long-term rental?
- How much will you rent it out for vs. how much will you pay for the home?
- Are you going to manage the property yourself, or hire a management company?
You will also need to consider the value of the home you are purchasing. Are you getting a good deal, or is it going to need a lot of work in order to be able to qualify as a rental property? Sometimes you’ll need to do a bit of renovation in order to accommodate tenants, so keep this in mind when planning your budget.
If you are considering a rental property, work with a local real estate agent who knows the Niagara real estate market inside and out.