Now that you have decided to become a landlord, it’s time to do some homework so that you start off on the right foot. As they say, “Well begun is half done” Becoming a successful landlord involves a series of steps, each of which needs to be meticulously planned. Right from choosing the right property to financing the right tenant for your rental property, learning the rules of tenancy and then finally, creating a tenancy agreement, There is a lot that you will need to do to ensure success as a landlord. You will have to do a lot of research and learning before you can put up your house or apartment for rent.
1: Know Your Objective
Understanding your end goal is the first step towards purchasing your rental property. If you consider rental property investment to support your retirement goals, it should be based on realistic expectations, your financial capabilities, chosen investment strategy, and the answers to the following five questions:
1. When do you plan to retire and how much money will you need in retirement?
2. What are your retirement income sources?
3. What is your budget for purchasing rental properties
4. Are you looking to diversify your investment to reduce risk, maximize returns, or lower taxes?
The above questions will help you keep sight of your end goal as you begin to choose an investment strategy that works fits your needs, while considering your first potential rental property investment.
2: Talk to Other Landlords
Talking to a mentor who are invested in same area or types of homes that you are interested in can make all of the difference. You get to know more about a sneak peek in to the future you as a landlord have to deal with. This can be about renters and their needs, local rental market trends, a bad experience they may have had and what you could do to avoid that at the beginning itself! When you speak with other landlords, it is important that you keep their “investment bias” in mind. With this in mind, you can begin to find investors with similar goals along with extensive resources.
3: Save for Down Payment
It’s important to consider how much money to save for a down payment. Ideally, you’ll want to have and it can depend on the mortgage rules in your province or federal rules. In Canada rental properties require at least 20 down payment saved before. Some of the things that can help you save your rental property down payment in a timely fashion are:
4: Estimate Property Expenses
Before you purchase a rental property, it is important that you know all about the potential monthly, and unexpected, expenses that the property will experience. These potential expenses include:
5. Choose the right property
This is probably the most important decision you make that can have huge impact on your future outcome. As a potential landlord, your choice of property can make all the difference between a profitable and a loss-making rental business. The right property could give you a steady stream of tenants and a good rental income, whereas a poor choice could leave you struggling with the accounts with huge mortgage to pay off your pocket. While there is no one strategy that works for all landlords and all locations, that ever rental property type you decide eventually make sure that is backed up per your strategy. Many landlords like to invest in to rental property apartments and condos, while others prefer a single family homes or houses for rent to implement their thought out strategy.
6. Go With Property With Simple Construction
Choose a property with design and construction that is likely to appeal to most people, particularly the ones you are looking house to rent to. If the design is too fancy or jazzy, it may not appeal to a lot of people the reason is simple, most people like homes where they can see themselves with something with neutral shades and simple designs. Do not let your own personal preferences affect your choice. The more customized design and colors you rental property has, lesser it's chances to get tenants who can picture themselves in the home to rent it faster. Look for something that everyone will like. So, simple the construction the better it is. It gives the tenants a chance to style the house the way they like. So, simple the construction the better it is. It gives the tenants a chance to style the house the way they like.
Also don't overlook consulting a property inspector before purchase the rental property to ensure all major hidden issues are known and considered prior to the property purchases. You don't want to be in a situation where you bought the property based on it's visible condition and cosmetic looks only to find out that you need to get the foundation, plumbing or electrical system redone later. Those expenses could eat up all your yearly rental income of your house for rent in some cases!
7. Do your research
It is extremely important to spend some time learning about how to choose locations and rental properties, value them and evaluate the specific rental market you are in. Remember, the success of your rental business depends on your due diligence and buying the right property in the right location. These are the key decision points. Try to learn about what attracts tenants, what makes them move in or move out and how the rental market looks in the long run in context of your desired rental property location, budget as well as property type.
8. Find the Right Location
When looking for the right rental property, consider an area with plenty of amenities such as malls, restaurants, parks and schools, low property taxes, growing job market, and low crime rates. It is not necessary to look for a property in the most posh neighborhood of the city. In fact, neighborhoods with solid working class often make a great choice that yield consistently great returns on your investment dollars. Also no matter how good the neighborhood is, tenants will not want the house for rent that is not ready and prepared for renting. So, don't choose a rental property that looks visibly needing ton of upfront investment to bring it to rental condition, off course unless you got it at steep market discount.
9. Buy at the right price
As Buying at the right price now will not only ensure steady income over time, it will also help withstand future fluctuations in property value. A good starting point is to benchmark rental prices for similar units in the area and then weigh it against the mortgage, taxes, and utilities you will be paying. You need to have enough margins to pay all expenses and still have some profit left. Once you have calculated this margin, you can analyze every property against this amount. Higher the margin, the better it is.
Any discount that you may get at this stage can make a huge difference to your ROI. So, try to get as much a bargain as you can. You may be tempted to buy a much cheaper house that needs maintenance thinking that you will get the repairs and renovation done. However, never do this unless you are sure that the effort and investment is worth it. Remember, repair and maintenance can turn out very expensive and the costs may eat into every penny you have saved in the first place.
10. Assess local rental regulations
Rental properties are required to meet a set of regulations set forth by local authorities. These regulations may vary across cities and provinces. Make sure the property you are eyeing complies with the rental requirements. Look for any potential safety and maintenance issues. In major Canadian cities such as Calgary you do need special permit and ensure compliance with specific bylaws if you want to rent out basement suites. If rental property you bought has a basement but does not comply to the required bylaws, you can expect to spend great deal of money to bring the property in compliance before you can rent out the basement suite.
11. Look for something closer to home
It is easier to manage your rental property if it is closer to your place of residence. If you live to far away, you may not be able to resolve issues quickly or even keep an eye. There is no one-size-fits-all strategy that can help you find a great rental investment, but there are steps you can take to ensure that you make a sound investment. Basically, it’s about doing a lot of research and evaluating properties from all angles before making a choice.
12. Avoid renting to Friends and Family!
One of the most common pitfalls for landlords is renting to someone from their own friends and family. In most cases they do that believing their rent and property is protected because they know them intimately. However when these renters starts paying rent late or don't follow the tenancy terms, it's hard for the landlords to enforce these rules without either having to jeopardize your friendship or relationship or being taken advantage of. This is a very bad place to be in! So stay away from renting to people in your close social circle unless you can really sacrifice that.
In conclusion, there is no doubt that being a landlord can be an exciting and rewarding endeavor. If you keep these five things in mind, your renting journey will most likely be a pleasant one. Remember your property and income are at stake, so take care of your investment and enjoy the ride!
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LEASEWELL is a premier property services company in Calgary. We help landlords with all aspects of their rental property so you can focus on things that matter most for you. while we do the heavy lifting for you. Let us help you find great tenants and keep your rental in top shape to maximize return on your property investment. For more please visit our website www.leasewell.ca or contact us
Are you looking to sell your home in Calgary, Canada? Many home sellers believe that your local Calgary realtor will handle everything and that all they need to do is sign the papers. This is not correct! As the homeowner, you play a vital role in preparing your home for the market, determining your asking price, striking the deal, and handing over the role of ownership.
It’s also important to know that everything from Realtor fees to closing costs will vary by market. Even if you’ve sold a home in Canada before, the process may be different if you’ve moved to a different province.
Below is an overview of the home selling process in Canada to help you make informed decisions at every stage and get the best possible outcome for your efforts.
Step #1 – Estimate your home value and cost of selling your home
When you’re selling a home in Canada, all you may be thinking about is making money. But before you decide to sell, you should also consider what it will cost you. The cost of selling a home can catch homeowners by surprise. A portion of your earnings will be spent on real estate agent commissions, along with an appraisal (about $400), repairs to the home, closing costs (about $500-$1,500 for sellers), moving expenses, and staging fees.
You may also face a mortgage prepayment penalty or discharge fee between $200 and $600 for paying off your mortgage early. You will need to check with your lender to see if this fee applies.
For some buyers, the cost of waiting is another thing to consider. For each month you wait to sell your home, you’re paying another month of mortgage, interest, homeowner’s insurance, and maintenance. If you’re hoping to reduce your living expenses and liability, listing your home as soon as possible may alleviate these costs.
The goal is to calculate what selling your home will cost you so you can set realistic expectations when turning a profit. Simply listing your home for more than you purchased it for doesn’t guarantee an automatic profit. You’ll need to consider how much you’re spending to determine how much you can list it for so you can do better than break even. You should also estimate your home value to understand what your home is worth.
Step #2 – Choose how to sell your home
When selling your home in Canada, you have three main options: choose from hundreds of Realtors, sell your home yourself, or sell directly with an i-buyer.
Home sellers might be surprised to know that not all Realtors are created equal. Not only do Realtors vary in skill in the industry; they also vary in commissions. Agent fees in Canada range from 3% to 7%, which has a major impact on how much of your home sale you walk away with.
For example, the average home value in Canada is $455,000, which means you could be paying between $13,650 and $31,850 in agent commissions alone. That’s a major difference that can quickly eat away your profits, so it’s essential to choose an agent that gives you the best value but also provides adequate service for the price you pay.
In hot markets, some homeowners skip the real estate agent commission altogether in favor of a For Sale By Owner (FSBO) approach. This means that instead of losing some of your profit to an agent, you take on their responsibilities yourself. However, homeowners don’t save as much as they expect because they still need to pay the buyer’s agent fee and the MLS listing fee. It’s also recommended to get a professional appraisal to set your listing price.
Make sure you weigh your options to see if you’re better off doing all the work yourself to save a little money vs. paying an agent to bear much of the home sale process and give you less responsibility in the process.
If you’re looking for a mostly hands-free approach that also gives you the best value, an i-buyer might make the most sense. You get a guaranteed offer on your home, no matter its condition, and don’t have to pay hefty real estate commissions.
Step #3 – Prepare Your Property for Sale
If you want to attract buyers the traditional way, you’ll need a standout listing that not only talks about the number of bedrooms and bathrooms but also sells the vision of what it’s like to live in your home. Aside from home features like big closets and square footage, talk about how close you are to area amenities. Mention if you’ve just repainted or added new appliances.
Use our guide on how to write a standout MLS listing that will earn buyers’ attention or skip the listing and hassles of home preparation altogether if you choose to use an i-buyer.
Most homes in Canada are not in sell-ready condition, which means you’ll spend time and money fixing up the home for potential buyers.
It’s difficult to estimate exactly how expensive this step is because repairs and maintenance can vary. Here’s a look at what some of the most common tasks will cost:
The most valuable repairs are increasing energy efficiency (recoups about 60% of your investment), adding a kitchen island or whirlpool bathtub (earns about 65% of your investment), and replacing the roof (ROI ranges from 50% to 80%). Your real estate agent can help you figure out which upgrades are the most worthwhile in your market.
If you decide to use an i-buyer, you won’t need to spend any money on repairs or staging. I-buyers purchase homes as-is, which can significantly shorten your sales timeline and expenses and increase your profits.
Step #4 – Add Appeal, Inside and Out
Curb appeal makes a strong first impression. Boosting your home’s exterior with bright flowers, a new mailbox, or freshly washed walkways can set a positive tone for what the buyer will find inside.
You may also want to do a little home staging to make your home more attractive to buyers. Home staging goes beyond cleaning and painting to make your home stand out from others. Some people even go as far as renting art or furniture to create the right look. This can cost hundreds of dollars per room, so make sure you weigh the benefits carefully.
I-buyers don’t care about curb appeal or home staging. If you’re using an i-buyer service, you can skip these expenses and hassles altogether.
Step #5 – The Offer Process
The average time a home will stay on the market before going under contract will vary between markets. There’s also the possibility that your home will remain unsold, especially given Canada’s real estate market downturn at the end of 2018.
If you receive an offer on your home, you can either accept the offer as-is, decline it, or make a counteroffer. The negotiation process is a tricky scenario as each party wants to walk away a winner in the deal.
Once both parties have reached an agreement, the offer is documented as a formal contract, and the closing process begins.
Step #6 – Prepare for the Final Transaction
While most of the tasks associated with closing are the buyer’s responsibility, homeowners also have work to do. Before the final closing date, you’ll need to locate important home documents, make repairs stipulated in the purchase agreement, and create the official disclosure statements.
The seller is obligated by law to disclose any known latent defects in the home, such as mold infestations or other dangers. Under certain conditions, you may be required to disclose if the property has been the site of a marijuana grow operation or if there’s a stigma related to the property (e.g., a murder occurred on-site).
Alternative: Sell Your House in Canada Directly
Selling your home is a long, strenuous journey filled with surprises and speed bumps at every stage. Knowing what to expect at the various stages of the process can help simplify your experience, but it doesn’t guarantee you will sell your home within your desired timeline or get a fair price for your home.
Properly takes a different approach to Canada home sales. Rather than spending time and money making repairs, getting your home ready to sell, and scheduling showings, Properly gives you a fair offer on your home within 48 hours. You get to skip the stress of wondering when or if you will sell your home and feel confident that you can close the deal on your schedule.