Finding places to invest money is no issue as there are many different opportunities to do so. One of the most solid types of investments that can be made is in the property. Even with this, there are several different options available. One of these is investing in rental property, which raises the questions as to whether this is a good investment and why.

Is Real Estate a Good Investment?

There are many different forms of real estate, so the answer to this question is going to all depend on which category of real estate a person is going to invest in. Some examples are:

  • Residential real estate
  • Rental real estate
  • Land real estate
  • Commercial Property Real Estate

They all have their pros and cons, but one that many find appealing is buying houses to rent.

Is Buying Houses to Rent a Good Investment?

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When people who are interested in this type of real estate are asked this question, there may be differences of opinions. There are a lot of myths that float about when it comes to real estate.  Some of these myths revolve around rental properties

It’s Not The Right Time

Some say the market has to be in a certain condition to make a wise investment. The ideal market would be a buyer’s market, but that doesn’t necessarily mean one should wait for this to come along. Buying in a buyer’s market for rental properties means taking more time and looking for good deals. There is always bound to be a few of them. It is a matter of getting to them first as they won’t last long.

Investors Need Experience And Training

Being as a rental investment is considered to be a business, many think they need to have some type of business training to be successful at this. This is not true. What is needed though, is proper bookkeeping and some knowledge as to what expenses can be claimed against the rental income. Even this is not necessary if the landlord relies on a good accountant right from the start. Anything that a rental property owner needs to know can be learned. For example, they are going to need to be familiar with the landlord/tenant act. This is something that is available online and can be learned from there.

The Income From A Rental Property Is Passive

Passive income is technically classed as income that is generated where the person receiving it is not actively involved. When it comes to rental property, the CRA rulings concerning this are quite complex. Looking at it from another point of view, those who rent out properties are involved in it. There are always repairs to be done, new tenants to be found and other responsibilities. In other words, buyers of rental property should not be under the impression that they are just going to be sitting back collecting rent.

There Is Too Much Work Involved

For those who have been involved in rental properties, they often will say there is too much work involved. There is work, but if it is organized and planned for then, it does not have to be all that time-consuming. Making sure that the rental property is in good condition for a start is one way of cutting down on work. Making sure the appropriate tenants are chosen is another. Then staying on top of small repairs is another way of reducing the workload.

A Minimum Down Payment Is All That Is Needed

One of the main reasons individuals invest in rental property is to generate some immediate and additional income. If they are carrying a hefty mortgage, this defeats the purpose. Ideally having a good sized down payment and getting a low rate of interest sets the rental property owner up for greater success.

The Property Will Increase In Value

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Generally speaking buying property and holding onto it will see an increase in its equity. If the property owner has to see prematurely for whatever reason, then there could potentially be a loss on the property. So there are no guarantees.

The Rental Property Should Be Conveniently Located To The Buyer’s Primary Residence

This is not necessarily true. A property that is in good shape and is home to good tenants doesn’t need to be close to the landlord. Now with everything being automated, even the collection of rent can be done this way.

Costs Can Be Cut By Using Inferior Materials

It is a big mistake for landlords to rely on using inferior materials for the renovations and repairs of their rental property. These are going to be short-lived and will need replacing long before quality materials will. Money is better spent on doing renovations properly so they will last longer.

Tenants Will Look After The Property

For those who are new to renting, they may be under the impression that tenants are going to respect the property in the same way the owner does. Unfortunately, this is not always the case. This is why landlords must take the time to screen their tenants properly.

Is Buying a Rental Property Worth it?

Buying a rental property can be worth it. Only if all the right components are there, which means:

  • Taking the time to shop for the right rental property deal.
  • Having the budget to do the necessary renovations and having them done properly.
  • That enough of a down payment is available, so money is not being spent on interest.
  • That the proper record keeping is implemented.
  • That time and care are taken in choosing tenants.

Getting into the property rental business is not something that anyone should jump into. They have to be sure that they are ready to take on this responsibility and that they have an understanding of what they are entering into. If this is done then buying rental property can be most beneficial for both the short term and long term investment.

Resources

https://www.advisor.ca/tax/tax-news/post-budget-passive-income-strategies/
https://buttonwood.ca/pros-and-cons-of-buying-rental-property/
https://www.moneysense.ca/spend/real-estate/renting/is-a-rental-property-a-good-investment/
https://ottawacitizen.com/life/homes/advice-from-a-realtor-buying-investment-property-do-your-homework
https://www.canadianliving.com/life-and-relationships/money-and-career/article/considering-investing-in-a-rental-property-read-this-first