Are you considering purchasing a rental property? In this blog post, we will be discussing everything you will need to know before becoming a landlord.
First things first: can you afford this kind of commitment? You will need to ensure you have a steady income and a sufficient savings fund. All of your high-interest debts will need to be paid off and you should be on track to meeting your retirement savings goals.
After carefully considering your overall financial picture, you will want to map out all of the costs associated with purchasing a rental property. It is important to factor in:
Purchasing a property as an investor rather than an owner-occupant typically requires a larger down payment. You will need to have a 20-25% down payment available to apply to the purchase of the rental property.
As a homeowner with an existing mortgage, you will need to apply for a new mortgage on the rental property. An investment property mortgage requires specialty financing. This customized mortgage loan is slightly different from a traditional second mortgage. An experienced mortgage broker can help you find the right mortgage for your situation, and at a great rate.
Will you be able to afford the mortgage on the rental property if you are without a tenant for a month or two? Ensure you have enough saved to cover your two mortgage payments, recurring expenses, and routine maintenance and repairs.
When it comes to purchasing a rental property, it helps to find a realtor who’s interested in establishing a relationship, owns rental properties themselves, and specializes in the buying and selling of investment properties. Your local Port Coquitlam realtor can give you good advice about the neighbourhoods that are popular with renters in the community.
Another responsibility of a landlord is finding and evaluating tenants. Taking the time to evaluate potential clients will make a big difference on your experience as a landlord. Your goal is likely to find the perfect tenants. You know the kind? The renters who take immaculate care of their home. The ones who decorate for the holidays and take pride in their rental as if it was their own home. If you find renters like this, do everything you can to hold on to them. These kinds of tenants tend to require fewer repairs and will leave far less wear and tear behind when they eventually move out.
Another option is to use a property management company. They will likely use a professional tenant screening service to check credit reports, references, and perform a criminal background check on perspective tenants.
The extra work upfront is worth it in the long run. If you’re interested in obtaining a rental property mortgage, contact your local Port Coquitlam Trusted Mortgage Knowledge Professional, Milka Lukacevic of the Mortgage Centre TMK Team.