Guest Post by Marvin Viachica
Are you considering buying your first property to increase your income? You’ve come to the
right place. Purchasing your first income property is extremely exciting, but it can also be quite
overwhelming if you don’t know what to look for. Below, we’ve put together a list of four key
factors to consider before buying an income property.
Location
With any real estate purchase, location is everything. When buying your first income property,
be sure to choose a neighbourhood with a growing population, one that is improving rather than
declining. The last thing you want is to buy property in an area with an already high vacancy
rate. To ensure your income property will be as profitable as possible, look for a location with
low property taxes, low crime rates, public transportation access, quality schools, and amenities
that residents will enjoy, such as restaurants, shopping malls, and movie theatres. Before
purchasing your first income property, you’ll also want to consider the demographic you’d like to
target. For example, if you choose to buy a property in a university town, or a part of town near
a local college or university, then you can expect students to make up the majority of your
tenant base. If this isn’t something you want, then look elsewhere.
Property Taxes
Though your heart might fall in love with a property, you have to use your head when making
this decision. That’s because, even if a property seems to be exactly what you’re looking for,
when you’re buying it as a source of income, you need to come at it from an objective point of
view. Thus, beyond the aesthetic or location of the property, you also need to consider the
property taxes. Property taxes vary across Canada, so don’t assume that the tax rate in Toronto
will be the same as that of Vancouver. Do some research in advance and if possible, choose an
income property located somewhere with property taxes on the lower side. High property taxes
are acceptable if you know you’re moving to a particularly hot neighbourhood where attracting
tenants will be a breeze. But in general, you’ll want to be aware of the property tax rate so you
know to factor that into the price.
Amenities
Nowadays, tenants aren’t simply looking for a nice place to live, they are looking for a building
and neighbourhood that has amenities. Before you buy your first income property, tour the
neighbourhood and decide if it’s somewhere you could see yourself living. Consider the local
entertainment and attraction options (movie theatres, parks, shopping complexes, restaurants,
fitness centres, etc…). If purchasing an income property in a condo or apartment building, then
also take into consideration the specific amenities offered by that building. For example, does
the building have a gym, pool, terrace, concierge service, or any other amenities?
Average Cost of Rent
Rental income is how you’ll make money from your property, so before you purchase a place, it’s a smart idea to research the average cost of rent in the cities/areas you’re considering buying in. At the bare minimum, you’ll want to ensure that the rent you charge will be enough to cover mortgage payments, taxes, and other expenses, such as moving. Do extensive research into the current average cost of rent in the area where you’re looking to buy, as well as the predicted cost of rent in the next five years.
With the tips above, we’re confident you’ll find the income property of your dreams in no time.
