Rental Property

Rental Property

The goal of many borrowers is to purchase a property they can live in and comfortably call 'home'. Some homeowners, however, invest in a property with the hopes of renting it out to tenants. & some homeowners save up to purchase a property for themselves, and THEN save up for a second property to rent out to tenants.

So many investment options!

So how did they begin building their home equity?

First Time Home Buyers

To get started, many homeowners begin their journey with the assistance of a licensed mortgage broker who helped them secure financing. Being a first time home buyer can feel like a pretty complex process, but with the help of a licensed mortgage broker it can feel as simple as putting your shoes on.

A licensed mortgage broker can help you:

To be informed of and take advantage of the First Time Home Buyer Incentive. To receive a lower fixed or variable rate on a smart amortization period by negotiating better terms on your behalf (this can lower your monthly payments and overall cost on your investment!) To understand the lending industry jargon and feel comfortable with the mortgage process

Tips For Approval On A Rental Property Mortgage

Mortgages aren’t handed out like candy – you need to prove to a lender that you are reliable and can afford your mortgage. Here are some notes a lender may look at when deciding whether or not to approve your mortgage file:

• Your credit score (understand credit 101 and learn how to get an EXCELLENT score)
• The size of your down payment
• Your income and employment history
• Your debt-to-income (DTI) ratio

If you’re worried about qualifying for a mortgage, we’d love to help you get pre-approved before you start your rental property search. We can also assist you with industry tips and use our strong relations with the lenders to get you a rate you may not have received on your own!

You Own Your Own Home, Now What?

Depending on your unique situation, you may be eligible to use your home as a rental property. We say ‘eligible’ because there are some criteria that may limit you may be limited in doing so.

Always be aware of the fine print, you may find that:

• The home you purchased does not allow rentals (this is more common for Air BnB/other short term rentals and less common for long-term rentals. Always check what the laws state within the region you are purchasing in)
• If you were a first time home buyer and took advantage of the First Time Home Buyer Incentive, you may not be eligible to use your home as a rental property
• Your strata says NO (big surprise there!)

If none of the above applies to you, you might receive the green light to use your home as a rental property - just ensure you’ve double checked with a realtor or your local government about any restrictions before renting it out.

The 411 Of Owning A Rental Property

Once you’ve done the hard part (becoming a homeowner!), you glide on to being a landlord; this means you are responsible in overseeing your property, so if the tenant has any issues, it is up to you to resolve them.

Here are some helpful risks and benefits to be mindful of with a rental property:

BENEFITS

• The rent is additional income which helps build your home equity
• You can hire a property manager to lessen your responsibilities with overseeing the property
• You can purchase landlord insurance which assists with any rental property damage, lost income etc.

RISKS

• If an appliance/integral structure of the house requires maintenance, you'll need to fix it or hire someone who can
• If the market increases significantly, your tenant is locked into their original rate and has many protections
• Unreliable tenants who are delinquent on their payments, in turn affecting your expected financials

Overall, having a rental property can be a great investment. Just ensure you are informed regarding the rights of both landlord and tenant!

Short-Term Rental Vs Long-Term Rental

You'd like to see your rental property making a positive impact on your wallet, yes?

There are a few things to know:

• With an Air BnB or other short term rental property, you have more flexibility in what you charge per stay which is great! However, there’s no guarantee that somebody will constantly be renting your property which means your monthly income may be unstable
• Renting long-term implies that you can sign your tenant into a contractual agreement usually stipulating they must live there for a certain length of time up to one year (or face penalties if they leave early)
• If you have a happy long-term tenant, they may want to rent from you for a LONG period of time; keep in mind that you can only charge them their original monthly rate plus annual increases as set out by the provincial government (influenced by inflation)
• If inflation or rental prices increase significantly, you may find you’re not making as much money on your rental property as you once were if you have a long-time tenant (but the comfort of having a stable, trustworthy tenant may outweigh this)

These are just a few considerations regarding your rental property. There are other avenues available to increase the returns on your investment.

Keep Your Mortgage Up To Date

Your mortgage agreement has one of the largest impacts on how profitable your rental property will be.

This is why it’s important to stay on top of refinancing or renewing your mortgage with the help of a licensed mortgage broker who can impliment creative ways to financially benefit YOU.

A licensed mortgage broker (such as myself, Kyle Benzies) who is an expert in the lending and borrowing industry will shop around to find you the best mortgage deal suitable to your lifestyle and goals.

If you’d like to discuss your options or inquire about a mortgage for a rental property, I'm just an easy (no-risk) phone call away.

Let’s make your investment worth it!