TAKE THE QUIZ NOW
Alberta is a hot spot these days, leading the way in real estate and dominating the news as an appealing oasis for foreign investors. We have lots of space, our vacancy rates are low, a new arena is going in and new housing starts are strong. I wouldn’t be surprised if you’ve been thinking about getting into the housing market in one way or another. First timers beware, buying your first rental property is a big commitment and investment.
If you do want to do this, I’m sure you’re already doing the necessary research in preparation as there are numerous articles outlining all the important details involved in purchasing a rental property. This quick quiz is meant to act as a preliminary checklist before you take the next step in the buying process and it is not meant to replace advice from a professional about your specific wealth building strategy.
All you need to do is write down how many A’s and B’s you choose to find out how rental ready you are.
1. Do you already own a personal residence?
A) Yes
B) No
2. Have you decided WHY you want to buy a rental property? Will it be a long-term investment, a short-term renovation and flip or a future property for a child?
A) Yes
B) No
3. Have you talked with investors who already own one or more rental properties?
A) Yes
B) No
4. Have you talked to a mortgage professional about potential financing options and what kinds of mortgage rates and payments you could likely see?
A) Yes
B) No
5. Have you thought about what kind of tenant you want to occupy the property and how you are going to find and qualify them? For instance, a family with pets?
A) Yes
B) No
6. Have you decided what kind of property you want to own? Apartment unit, townhome , duplex or house.
A) Yes
B) N0
7. Have you decided if you are going to self-manage the property or hire a property management company at a cost?
A) Yes
B) No
8. Have you completed a cash-flow analysis spreadsheet to determine how much rent you have to charge in order to cover costs and maybe even generate additional revenue from your rental?
A) Yes
B) No
9. Do you have access to assets for the downpayment? Rental property financing requires minimum 20% of the purchase price for downpayment.
A) Yes
B) No
10. Have you decided if you’re buying a rental property on your own or under a joint venture with another person or group of people?
A) Yes
B) No
11. Aside from the downpayment, do you have liquid assets available that you have allocated to costs relating to your new rental property? For instance if something breaks down do you have the cash to fix it right away.
A) Yes
B) No
Mostly A’s: Rental Ready
Looks like you’re ready to take the next step in buying your first rental property. You’ve decided why you want to own a rental property, you know what kind of property you’re looking for and the kind of tenants you want to occupy it. Awesome! As financing is now more difficult to obtain when it comes to rental properties, you’re prepared for what could be a potentially higher interest rate and perhaps a larger downpayment. Good thing you have your cash-flow analysis handy and you can play with the numbers a bit before finding your perfect revenue property strategy.
Mostly B’s: Research Ready
The mortgage qualifying process for buying a rental property is a bit different than when you are buying a home to owner occupy. It is not only harder to qualify for a rental property mortgage now, but you now have to change your mindset to a landlord’s perspective as it’s no longer about you living in that home. Your goal is to attract a tenant to live in the property who is willing to pay a rental amount sufficient to generate a positive cash flow at the end of each month. Research and preparedness is what could mean the difference between a successful rental property or a property headache. Before you start the purchasing process, talk to some experienced landlords who are both knowledgeable and trustworthy. If you don’t have access to someone like that, start with some networking groups of other new property investors. Make the most of the resources you have access to.
A’s and B’s: In-Between Investor
You’re on your way to “eventually” purchasing your first rental, but you may not be quite ready to begin just yet. There might still be a couple of things that you’re undecided on; maybe you’re still experimenting with the numbers to see what suits you best or talking to some other investors about some helpful tips or trying to find the perfect joint venture partner. That’s okay as long as you’re not on a deadline. If you’re feeling pressured because the perfect property has come up but you don’t yet feel you are fully educated, perhaps it’s not the perfect property.
If you’re looking for mortgage advice or a referral for another great real estate professional, contact Jackie the Mortgagegirl at 780.433.8412 or email info@mortgagegirl.ca. Stay in the loop by following us on Twitter @mortgagegirlca.