I have a lot of people ask me about owning investment properties. There are pros and cons to owning investment properties, but typically, if you’re in it for the long run, it can be a worthwhile investment.
Here are a couple things you should do, along with a few things to think about, prior to purchasing an investment property.
This post is not a substitute for professional accounting advice. Speak with an accountant to ensure you’re receiving current advice specific to your situation.
Review your Bylaws
Ensure you understand your building’s bylaws regarding rentals, including ability to rent (and waitlist information), minimum lease lengths and more. Have a look through the other bylaws regarding number of people allowed in a unit and pets so you can ensure you find the right tenant. Be sure to give a copy of the Bylaws to your tenants prior to moving in and submit a Form K (Tenant Information) to the Strata.
Talk to your Accountant
Owning an investment property will affect your taxes, profit or not. Talk to your accountant to understand how the income from the investment property will affect your taxes, what you can claim as an expense, and what you need to know about the future Capital Gains Tax.
If you’re purchasing a new property and turning your current property into an investment property, let your accountant know as they should make a note of the current value of the property for capital gains purposes. When you eventually sell the condo, you’ll have to pay capital gains tax on the profit made above the current value.
Research the BC Tenancy Act
Spend some time reviewing the BC Tenancy Act so you understand your rights, the tenants rights, and what you should do before, during and after every tenancy including details regarding rent increases and evictions.
BC Tenancy Information: https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies
Browse Craigslist
Spend some time browsing Craigslist for an idea of what similar units are asking for in monthly rental rates. Keep in mind, you only see units available for rent on Craigslist, and not the final rental amount agreed too. In Vancouver, Craigslist is your best bet in finding a tenant, though you are welcome to post on other sites for extra exposure.
For your own listing, take good pictures and prepare a positive write up.
Consider using a Property Manager
If you don’t want to manage any aspect of the rental, consider hiring a property manager. They’ll prepare the listing, screen the tenants, collect the monthly rent, handle any repairs and maintenance and communicate with the tenant. The property manager will then pay you the monthly rent every month minus their fee and any repair costs. If you need a referral to a good property manager, let me know.
Screen your Tenants
Spend some time screening tenants prior to agreeing to a lease. Ask for references and understand who will be living in the unit. Collect a damage deposit and post dated cheques for the monthly rent.
Require Tenant Insurance
With insurance rates in BC increasing, issues resulting from mistakes and unforeseen problems can be costly. Ensure you carry a landlord insurance policy and ensure your tenant carries a tenant insurance policy to cover yourselves in case of any damage.
As always, let me know if you have any other questions.
Kristi