Over the years many people have asked me if owning an income property was a good investment. My response, “Of course it is a good investment, provided the buyer does there due diligence and they are the right person for the job.”
Let me explain what I mean. There are many different types of investment properties, from single family homes to multiple units or even a mixed use situation (commercial and residential combined in one building.) Some investors prefer the single family home like a townhouse condominium because the exterior maintenance of the property such as landscaping and snow removal is taken care of by the condominium corporation. Plus they have only one tenant to deal with.
First time home buyers often consider purchasing a two family home because the income from the second unit will help supplement the mortgage payment.
Other investors may prefer a multi-residential building with several units. These are usually more involved as you have several tenants to deal with, all with their different issues. These investors may hire a property management firm to look after the tenants and maintenance issues but remember, this expense reduces the amount of return on your investment.
Some investors think they can just purchase any property and turn it into an income property. This is not the case. Investors should always be aware of all municipal zoning and by-laws affecting income properties such as how many units are allowed in a building, required amount of parking available for tenants, fire retro-fit requirements, and this list goes on. It is not just a matter of adding extra kitchens and bathrooms to increase the number of rental units.
Another consideration for real estate investors is the financing requirements. The amount of down payment varies depending on the property and whether it is owner occupied. I always recommend the investor should work closely with a good mortgage broker who specializes in financing for investment properties.
To sum it all up, investing in residential income properties can be very financially rewarding over the long haul, but you need to do your homework and have a good understanding of the requirements and level of commitment required to be a landlord. Most of all, be sure to use the services of a professional REALTOR® who has experience in in selling income properties.