Buying a rental property is an excellent way to build your financial portfolio. Not only can a rental property for sale provide you and your family with a steady stream of income, but it can also give you the financial freedom you need to enjoy life.
When looking for a rental property for sale, there are a few tips that you can use to save both money and time.
1. Avoid a fixer-upper for your first rental property for sale
When looking at purchasing your first rental property, makes sure you avoid any fixer-upper projects. As tempting as it may seem to buy a property that you can fix and renovate to your exact tastes, there is often a reason why this property is a fixer-upper.
All fixer-upper properties have the potential to become financial black holes. For a new owner who has no experience renovating properties or experience within the building industry, a fixer-upper project can quickly become a nightmare to turn into a financial success.
When looking for a rental property for sale, make sure you look for an established property with very little maintenance needed before renting out your commercial property.
2. Choose the right Neighborhood
Every potential landlord’s first instinct is to search for a rental property for sale in a “nice” area, but this can become a mistake due to excessive property costs that are found within “nice” areas. Instead of looking for property in a ‘nice’ area, search for property in a modest area as these areas will have better rates for your rental properties.
The best modest areas will have the following features;
- An employment percentage of more than 50%
- Low crime rates
- Few vacant properties
- Good amenities such as markets and respected schools
- No homeowners associations as this can damage your profit margins
3. Location is key
Most new landlords limit themselves by searching for rental property for sale in their current province/state. If you choose to use a property management group, you can look at buying properties outside of your state and in a location that will allow you the best chance for financial success; here is a list of the best places to buy rental properties in Canada.
4. Make use of a property management service provider
As mentioned in the previous tip, as a landlord, you can choose to use a property management group to manage your new rental property. Property management groups are beneficial if you are purchasing property in a different location and want your rental business to generate money on its own without you having to be involved in all of the day-to-day tasks.
Property Management groups provide to following services;
- Maintaining your property records
- Handling all the property maintenance concerns
- Marketing your property
- Collecting your monthly rent
You can expect to pay a fee of 5% to 10% of your rental income to a property management group. However, the benefits are worth the expense.
5. Take care of your debt before you look at buying
Canadian banks are super conservative when it comes to financing mortgages for rental properties. One of the best ways to ensure that your finance application is successful is to ensure that you have no or very little personal debt. The best way to check this is to make sure your debt–to–income ratio is less than 36%; if not, you will need to address this situation quickly.
Taking care of your debt will show the banks that you can pay off a mortgage and will result in your chances of the banks rewarding you with a relatively low mortgage.
Final thoughts
When searching for a rental property for sale, it is vital to look for a well-established rental based in a modest neighborhood. Buying a rental property for sale in a modest neighborhood will allow you the best chances at finding a tenant as your property will be situated close to all the relevant amenities and be in an area with a low crime rate.
If you have a time-consuming job, choose to use a property management group as they will allow you to focus on your employment while maintaining your rental property for sale, no matter the location.
Lastly, make sure that you maintain a debt-to-income ratio of 36% or less to better your chances of receiving finance to help with buying your retail. It’s also recommended to work with real estate professionals such as Kean Real Estate Group to figure out whether acquiring a rental property for sale is a viable investment opportunity.
