CANADIAN RESIDENT – BUYING AN INVESTMENT PROPERTY IN VANCOUVER
So you’ve built up equity in your home and you’re wondering if you should invest your money in a Vancouver rental property.
When all the boxes are checked, expanding your investment portfolio into Vancouver real estate is always a solid decision, especially into the Vancouver real estate market. Unlike depreciating assets, housing has consistently increased over time and if you have a mid to long term time horizon and can wait out market fluctuations, now may be a good time to consider making the move.
Prior to making the decision, you should take the following into consideration:
- Ensure you can carry the properties mortgage should you have to. Rental estimates take 2 months a year of lost rental as a precaution. You may have to do some renovations, your tenant could leave early or it could take time to find a new tenant. Having some money set aside for these unforeseen events is very important.
- What is your cash flow? Do the math ahead of time so you’re very clear on what you need to budget. Have your financial advisor calculate mortgage payments should interest rates go up and ensure you can manage the payments.
- Buying a principal residence is very different than buying an investment property. A minimum of 20% down is required for investment property from 1-4 units. Too, rental properties are viewed as a higher risk by lenders t be aware that interest rates could be higher than conventional primary residence mortgage rates. Plus, lenders have very different guidelines for rental properties, so getting approved ahead of time is a must.
- In addition to the usual closing costs and legal fees associated with buying a property, there can be additional costs associated with a rental. For example; any property upgrades, maintenance fees if a single-family dwelling, city fees or additional taxes associated with a revenue property. Consider strata fees if it’s a condo or town-home. Are you planning on managing the property yourself or hiring a management service?
- CRA requires you to declare rental income. Be sure to check with your accountant on what fees and taxes apply should you purchase a rental property.
- Think about location and what type of renters you will be attracting. What income are you wanting? What are the average rents for various areas? Where are you planning on buying? Is it conveniently located next to a bus route or Sky train? Yaletown is a desirable spot due to its proximity to shopping, restaurants and the SkyTrain.
Recently, we helped clients who owned a home on the west side buy two rental properties. They wanted to access the equity in their home and generate monthly revenue. They put 50% down on two condos in kits. Both buildings were well maintained and had reasonable strata fees. New appliances were integrated and fresh paint throughout to upgrade the condos. Now they generate a positive cash flow and their mortgage is being paid down. When they are ready to retire in 20 years, they will have 2 clear title properties and additional revenue to supplement their retirement income.
As a Top Real Estate Team specializing in the Vancouver real estate market, we have helped hundreds of clients purchase revenue properties. We take pride in helping our clients save time and make more money. If you are looking to purchase an investment property in Greater Vancouver, our team has the best realtors with exceptional experience and insight.
Call us today If you’re interested in learning more about how to purchase investment properties, click here to access our buying process.
Of course, we’re always available for a call or a coffee to chat further about how we can help you purchase your investment property!