Are you considering investing in a rental property? Owning a rental property can help you diversify your investments and provide an extra layer of financial security. Whether it’s a nest egg for your family or your retirement plans, investing in a rental property can help you achieve your financial dreams.
Like other investments, real estate is not without its risks. The attraction in investing in real estate is its simplicity. Owning property is straightforward and tangible. When we see our neighbours’ homes soar in appraisal every year, we want to invest in our future, too. But investing in a rental property has many possible pitfalls if you don’t do your research. We’ve compiled the five top features of a profitable rental property to help you get started.
Choose a Tenant-Friendly Location
You’ll need to make sure that your investment property is in an area where tenants will rent. Make sure the average rents, rental listings and vacancy rates match your goals first. Statistics Canada provides data on vacancy rates by metropolitan area in British Columbia and Canada, which you can check out by year. You can also visit StatCan to compare dwelling characteristics in different regions, like basement suites, duplexes or condos.
A Livable Neighbourhood
You’ll need to look at a few factors when considering the neighbourhood. Researching the area will give you valuable information about your potential tenants. If you buy a property near a university, you’re likely to get students. The neighbourhood will affect the vacancy rates and the potential tenants you’ll attract in the future. The second most crucial factor is schools. If your property is near a school, young families may be more attracted to a long-term rental in the area. Start by visiting the neighbourhood, yourself. If you’re out of town, there are other ways to research the neighbourhood online. Start by checking if the area has any community Facebook groups. Use Google Earth to ‘visit’ the neighbourhood virtually, or check if the neighbourhood has a local newspaper online.
Think of the Future
A rental property is a long-term investment, so you’ll need to make sure the neighbourhood has potential for the future, too. Take a drive through the neighbourhood and take an inventory of all the facilities. Community centres, libraries and parks are indicators of an established neighbourhood. You want to see if the area allows potential tenants to live, work, and play in the area. Are there restaurants, shops or malls for people to get what they need? Where do people work in the area? You’ll want to look out for commercial buildings and signs of future development. If you find residential or commercial construction, the area is expanding, and developers expect the population to increase.
Make Sure Property Taxes Don’t Weigh You Down
Checking the property taxes of an area is a straightforward way to determine your cost-versus-profit potential. You will need to decide for yourself what amount you feel comfortable paying. In this case, consider your financial situation in the case of a recession or period of tenant vacancy. If you originally planned to use the rental charges to pay for property taxes, how long are you willing to foot the bill when your property is empty? Visit the BC Assessment website to check out property assessments in the area, which will give you an idea of the taxes you’d have to pay.
Make Security a Priority
At the end of the day, no one wants to live in an area with a high crime rate. Local police stations may share crime rate information with you if you visit and ask. You can also check out Statistic Canada’s Canadian Crime Tracker to give you an idea of the rate. When reviewing data on crime rates, one thing to look for is to check if the crime is rising or falling in the area. It will tell you whether the area is receiving community intervention or support and if brighter days are ahead for the neighbourhood.
Now that you know the tip five features of a profitable rental property, you can begin to consider whether you’re ready to take the next step. Investing in a rental property is a significant consideration, so take your time. And if the idea of renting out your property is overwhelming, we’ve got you covered. Ronin Property Management will screen quality tenants so you can relax. Check out some of our listings here.