The Biggest Differences Between Buying An Investment Property And Buying A Home
The real estate market offers an alluring value proposition for investors trying to get the most out of their current money. Everyone can see how profitable the residential housing market is, but homeowners especially. Real estate investing is a crucial component of any financial portfolio nowadays.
Home prices have increased by 375% across Canada in the past two decades, with high-in-demand markets such as Toronto and Vancouver seeing increases over 450%. A recent Royal LePage survey showed aggregate housing prices in Canada rising by 21.4% in the space of a single year.
If they have the money to take out a second mortgage, it may be enticing for people with the resources to think about buying and managing their own investment property when seeing such incredible statistics in such short periods of time. People who have owned and maintained their own homes for many years or decades may succumb to a particular, comfortable mindset: I’ve done this before.
How challenging could it be?
Unfortunately, becoming a property manager has its own unique set of expenses, concerns, and pitfalls, making the purchase of a property intended Finding The Right Property… For Someone Else
You might have a list of everything you’re looking for when looking for a family house. Is the structure solid? a large yard? garage for two cars? completed basement? What kind of house you want to name your own is best left up to you.
Compare this to the requirements and factors for a rental property. This list appears extremely diverse and could contain:
What is the neighborhood’s livability?
Are amenities (such as food stores, schools, and bus routes) close by?
Will there need to be any significant repairs or renovations soon?
Is the heating system and energy usage in the house reliable and efficient?
What kind of renters (students, families, or local employees) am I going to get here?
Will I be able to fill vacancies if I rent to transient or erratic tenants?
What is the local average for rental prices?
How will homeowner’s insurance and property taxes impact my financial situation?
Does this property have the potential to increase in value?
With larger or multi-unit properties, these problems multiply and grow more complicated, raising new queries:
Will I be approved for a commercial mortgage loan, which is necessary for structures with five units or more?
How many tenants can this building accommodate? Will I have enough supplies to fill every unit?
How many rooms are there in each unit? Do the units differ significantly from one another?
Are there any overdue penalties, violation notifications, or taxes associated with the structure?
These are only some of the major factors worth considering, serving to show how difficult it can be to find a profitable opportunity. Ultimately, the search for a sensible investment property can quickly become a full-time job in itself.
Finding and buying the ideal investment property can be a time-consuming and expensive process, but once you have the keys in your hand, planning becomes the watchword. Any new home needs more than just a deep clean to be ready for rental; it also needs to be thoroughly inspected, with new paint on the walls, effective heating, air conditioning, hot water, a full set of functional appliances, and so on.
Property buyers are increasingly being compelled to forgo a house inspection when submitting an offer as a result of an increase in bidding battles and high demand in general. A home that appears flawless upon initial examination may be concealing serious flaws, such as major structural or foundation difficulties, mould and moisture issues, or other issues that would only be discovered by a home inspection. This kind of issue must be fixed correctly by experts and cannot be disregarded. By itself, this makes buying a house a dangerous endeavour that may ruin your investment before it even gets started.
The challenge of finding tenants on your own comes after the property has been repaired, cleaned, and is ready to rent. In order to do this, you need to do some research, write and post ads, interview potential tenants, gather applications, schedule frequent property viewings, do background checks, and sign a formal contract. After all that, you hope the renters you’ve selected are dependable and trustworthy. The entire process starts over if they decide to leave or if you have to evict them.
The Responsibilities Of A Landlord
Owning property is one thing, but turning into a landlord is a very different animal. The time-consuming and burdensome nature of the legal, ethical, and financial obligations can produce unanticipated issues that cannot be disregarded.
According to Ontario’s Residential Tenancies Act, at minimum, a landlord is responsible for ongoing property maintenance and repair (including complying with health, safety, housing, and maintenance standards), ensuring a supply of fuel, electricity, and utility services, and issuing rent receipts to tenants.
A landlord must make many excursions back to the property to take care of other duties like maintaining common spaces, fixing appliances, clearing snow from driveways and pathways, and periodically disposing of rubbish (whether you live close by or not). Appropriate timing is essential since landlords must give a 24-hour written notice before accessing a rental unit, which complicates problems.
Finally, the interpersonal component of landlord-tenant relations is not taken into consideration by these legal standards. When your tenants have questions or complaints, you must address them since you are a service provider, and you must do it on your own schedule. What is your time worth to you in light of all of these considerations?
An Easier Way
Thankfully, the considerations mentioned above don’t need to be a barrier to real estate investment. Privately held real estate mutual fund trust investment trusts (MFTs) like those offered by Pyramine allow investors to passively earn income, benefitting from real estate growth without taking on the risks and responsibilities. Funds at this scale are far more profitable and sustainable, thanks to a carefully selected, diverse range of investment properties.