Buying a rental property
The appeal of investing in a rental property is simple for Cecile Barington: "I like the idea of making money while I sleep," says the Toronto homeowner and landlord.
Now in the market to purchase another rental property, Barington has had experience owning commercial property, as well as multi-unit and single family rentals. The latter was somewhat of an unintended investment, but one that worked out for her.
"The single unit property we bought was not yet built, so we got it at a good price in a great area of Toronto," she says. "Our original intention was to resell the home once the development was complete. Turned out a lot of other buyers had that intention at the same time."
So with no profit in sight, Barington decided to hold on and rent out the property. Three years later with the rental payments carrying the mortgage and no longer a surplus of houses for sale in the area, she sold for a considerable return on her investment. Because her rental was in a high-end district, she attracted executive tenants who remained there the entire time Barington owned the house.
While Barington had success with this arrangement, buying an investment property is a major financial decision and while many advisers promote the stability of Canada's real estate market, there's still risk involved.
Toronto real estate agent Forbes Lilford of Remax Realty says a good part of his business is income rental properties. He likes the single-family rental, especially if it's in a high-rent area.
"With multiple unit rentals you've got lots of people to deal with and that increases the chances for problems and also for vacancies. I personally think single-family rentals are the best, but the key, and it's very very important, is to make sure if you don't have it rented you can still carry the property."
Lilford says he's seen people over-extend themselves and then "panic until they get a new tenant."
He reminds potential purchasers that second properties don't qualify for Canada Mortgage and Housing Corporation (CMHC)-backed mortgage loans, so a 20 per cent down payment is required (as opposed to the 10 per cent typically now needed for a family home).