Do your research if you're thinking of buying a rental property as an investment and to create income. Before you start looking, know how you plan to finance your purchase. You must have a down payment of at least 20% of the purchase price when buying a property that is not your main home.
3 questions to ask yourself
How will you finance it?
How much income can it generate?
How much will it cost to maintain it?
You must have a down payment of at least 20% of the purchase price when buying a property that is not your main home.
5 things to know
The local real estate market – Prices and growth rates vary.
The local rental market – Rents and vacancy rates vary.
The costs – Factor in start-up and ongoing costs.
A landlord's rights and responsibilities – Ask your real estate agent or read Help for Landlords.
Your future tenants – Screen applicants and run credit checks.
Ask your real estate agent or builder about the Rental Housing Rebate if you're buying a new residential property to rent out. If the property is more than $400,000, HST applies in Ontario.
Factor in vacancy rates
As a general rule, allow for a 5% vacancy rate in your financial plan. According to the Canada Mortgage and Housing Corporation (CMHC), vacancy rates vary across Ontario, and across Canada. Look at rates for early 2011:
For Canada’s top 35 major centres, the average vacancy rate was 2.5%.
In Ontario, rates averaged about 2.5%.
Rates varied across Ontario – they were highest in Windsor and London.
To get an idea of how rents can vary depending on location, check out average rents in Ontario.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
Follow us on Twitter: