I cannot help my frugal self — I refuse to pay more for something than it’s worth. I’m nearing 30 days left before my house sale closes and I cannot seem to find a new property that fits my criteria AND has reasonable potential for added value.
So, this week I began exploring an entirely new home-buying idea. What if, instead of succumbing to the pressure to buy an over-priced inner-city detached home, I bought with an entirely new set of criteria; a small, centrally located condo with high rental income potential?
I’ll live in it for a few years, and when I finally do find the right shack, I can rent out the condo and move into my more affordably priced dream home.
This idea led me to hours of Google research to determine what characteristics I should look for in a profitable rental income property.
Buying in a good neighbourhood will help attract quality tenants. If you would like to rent to a family, the property needs to be located near schools and playgrounds.
Proximity to downtown would be important in attracting a downtown professional. A low neighbourhood crime rate would make tenants feel safe.
Locations that have growing employment opportunities attract a high volume of potential tenants. You can determine which communities are growing by researching on Statistics Canada or by visiting your local librarian.
Municipal planning departments can inform you on what other developments are set to take place near your rental property. Generally speaking, if there’s significant development zoned for your area, like malls or condos, growth is expected. But certain developments, like a major thoroughfare could increase noise and decrease green-space which will hurt your tenant prospects.
Vacancy rates indicate how successful you’ll be at attracting tenants. Low vacancy rates allow landlords to maintain or raise rental rates. Alternatively, high vacancy rates force landlords to lower rents to scoop up tenants.
The condition of the property can be determined by a home inspector. Avoid ones with structural integrity issues. Inexpensive aesthetic changes can be made to ‘healthy’ properties that will attract tenants.
Rental rate will determine whether the property is to be profitable. If the rent is not enough to cover the mortgage, condo fees, and taxes, keep looking around.
The bottom line on rental properties is that they’re supposed to contribute to your equity and monthly cash flow, not the opposite. In my case, it may serve a secondary purpose — it buys me time to find the right house while building up a long-term investment.