Buying a Residential Investment Property

Wouldn’t it be great to have the tenants paying down the mortgage? Once the mortgage is paid down, all the rent would be extra income! Or perhaps you could sell the home in 20 years for a huge profit and then retire?

Mortgage for an Investment Property:
Most banks will require a 10-20% down payment to purchase a rental property. However, if you already own a home, some banks will give you a secured line of credit on your 1st home and then they will allow you to use that line of credit for the down payment funds. Some mortgage websites indicate that it might also be possible to purchase with less than 10-20% down. Whether or not you will qualify for a mortgage often depends on the rental income (note: money from “illegal” basement apartments will not be included) minus the expenses (mortgage payments, interest, and taxes). A large plus when it comes to mortgages on an investment property is that the interest is tax deductable.

Mortgage Insurance:

Mortgage insurance on a rental property will not necessarily be more expensive, however, most home insurance companies will not insure the home against “vandalism by tenants”. So if your tenants decide to have a wild party, and they destroy your home, then your insurance will not cover the damage.

Tenant’s Rights:

Each province has a different Tenant Act that outlines the rights of the tenant and the obligations of the landlord. If it’s your desire to be a landlord, it would be a good idea to become very familiar with your Provincial Act. In Ontario, it’s called the Residential Tenancies Act. The Ontario act, in many people’s opinion, offers the most amount of rights to the tenant (and conversely the least amount rights to the landlord).

A happy person!

It might seem like there are many challenges that can be faced by becoming a landlord. However, if you came across someone who purchased a property 30 years ago, in the right neighborhood, for $80,000, and it’s now worth $280,000, you can be quite sure that they might be happy with their investment decision. There is a lot of investment advice available online. So do your homework in order to save yourself time and money!