Buying an Investment Property in Ottawa
Buying an investment property in Ottawa is one of the most effective ways to increase your passive income and grow your assets. That being said, it is also a huge decision and commitment. In order to get the most out of your money, you’ll want to consider several things before you get ready to purchase.
Let’s get into the advantages and disadvantages of owning a rental property in Ottawa. Some of the advantages include:
Increase your monthly income. As long as you have tenants in your rental property, you can expect a regular monthly income.
Cover mortgage costs. Owning property usually means an appreciation in value over time. When you have tenants in your property, their rent will most likely cover the cost of your mortgage, and perhaps your property taxes as well. This means your property will be paid off, without any extra money from your bank account.
Appreciation. The housing market in Ottawa has been on a relatively steep incline. Most properties are appreciating quickly in value, meaning your investment will be worth more in a few years’ time!
But there are disadvantages of an investment property too.
Landlord responsibilities are not a light load to consider. You will have to be available to your tenant at any time, especially in emergencies. You will need to be well equipped to cover any issues in the property and have a variety of skilled labour people to assist you in any issues that arise. Issues in your own home can be procrastinated if need be, but your tenant will expect a quick and effective solution to any of their problems.
Just because you own a property, that doesn’t mean it will always be rented. Choosing to own an investment property opens the risk that you may be paying for the property yourself for many months if you cannot find a tenant. It’s important to plan ahead and ensure you are able to afford this.
Unexpected expenses may arise. You will have to have a budget set to address emergency concerns on your property, as well as to cover any months your property is not rented.
You will have to consider property upkeep. When renters move out, you may be responsible for covering damages. During the summer, depending on your contract, you may be responsible for mowing the lawn. In the winter, removing snow. You will have to work with your lawyers or advisory team to draft a contract that covers everything you need.
Now, if you’re still interested in purchasing an investment property, let’s get into choosing the right one for you.
First and foremost, are you ready to purchase a property? This means you have to consider your current financial situation, including your credit. You will need money for the down payment, good credit for financing, and some extra spending money for legal fees and other costs that come up during a real estate transaction.
Next, you’ll need to consider the type of investment property that is going to work best for you and your goals. Here is a list of questions to get you started:
Who is your ideal renter? Do you want students, a family, a young couple, or a single person?
What type of home would this ideal renter want, and why?
What area of Ottawa would this ideal renter look for? Would they want to be close to a university, an elementary school, or the downtown core? Would they want to be in a Neighbourhood Watch area, or perhaps value a home near the highway or O-Train for an easy commute?
Is this neighbourhood typically used for rentals? What is the demand for rentals in this area?
What kinds of jobs are commutable from this area - and is your ideal renter more likely to walk or drive?
Choosing a property with a person in mind can help you ensure that it will fill up once you list it for rent. That being said, some of these questions are highly detailed. An Ottawa Real Estate Agent from New Purveyors can help you with these questions when you begin your property search.
Now let’s consider your investment from a financial point of view. Buying an investment property is a long-term investment, meaning that it needs to still make financial sense years down the road. Here are some more questions to consider. Your agent can help you work through them as well.
How many repairs is this property going to need in the next 5-10 years?
If the property is a condo, how are the condo fees predicted to change in the next 5-10 years?
Is the neighbourhood under construction? Are new schools, stores, and roads being built in the area?
Or, has nothing changed recently? Are the local buildings in decline? Are the local schools becoming outdated?
All of these considerations will help you predict how valuable the property will be in the future. If the neighbourhood becomes less desirable to your ideal renter, it may be harder to fill your investment property. If the condo fees become too expensive, you may end up paying significantly more than your tenant pays in rent, making the property more of a money-drain than a money maker.
Finally, work with your agent to view a few properties in the right location, for your ideal renter. Ideally, you’ll want to balance property size - too large and you may be paying a huge amount of property taxes for only a limited increase in rent price. You may be interested in choosing a property based on the structure and location, and making changes to the paint and appliances for a more valuable rental long term. You may choose a brand new build to increase the longevity of your property or appeal to more modern renters.
