Investment Real Estate, Is it Right for you?
There are an abundance of properties for sale in the Edmonton market and many homeowners are aware of their current equity position. They are wondering if renting out their property makes sense for them. There are a number of factors to consider when making the decision to rent out your home.
Take a look at the tips below to help you determine if this is a good option for you….
This is one area often over looked by many. You have the option to try and manage it yourself to save monthly costs however you must be prepared to service the property by providing the tenants with timely service and ongoing maintenance.
You can choose to have a hands-off approach by hiring a property management company that can handle finding the right tenants, key help, rent collection, and repairs. Property management fees can vary depending on how many units you have and the services that you require them to complete. Be sure to determine if your property will allow for a positive cash flow as a rental unit.
Consulting a tax accountant who understand Edmonton Investment Real Estate is very important like knowing that your surplus rental income is taxable as well as most of your expenses are tax deductible. Expenses such as mortgage interest, property taxes, maintenance costs, insurance and any other expenses incurred through renting the property can all help in reducing your tax bill.
WHAT TYPE OF INSURANCE DO YOU NEED?
You must inform your current home insurance provider that your home will now be a rental property and not owner occupied. There are some different coverages that you would want to be aware of and have in place. You do not have to cover your tenant’s personal property, that is for them to have coverage.
WHAT ARE YOUR MONTHLY COSTS?
Are you aware of your monthly mortgage payments (principal and interest costs) along with property taxes, home insurance and maintenance costs? Make sure you factor in a cushion for cashflow as well as vacancy.
WHAT TO CHARGE?
Knowing what the rental market is like in your area can determine whether this is a good idea. Location does play a big factor in what rental rates you can charge as does as the condition of the property. Do keep in mind that you are still subject to market conditions. Make sure the amount you charge for rent is comparable to similar properties in the area. If your costs are substantially higher than the going rental rates, you may find your property sits vacant and you having to make all the payments. If you do not know what the market rents would be, you can always hire an appraiser to complete a market rents assessment to give you a better idea.
Here is a great rule of thumb to determine whether cashflow shall be achieved:
Rents (80% of rents collected minus mortgage payments minus property taxes minus 5% for insurance costs and minus 5% vacancy. If the numbers still work, then it makes sense.
As always, if you have any questions or would like more information, please do not hesitate to contact Eva Neufeld (Edmonton Mortgage Broker) at 780-244-0505 or firstname.lastname@example.org