Creating an investment portfolio is one of the most important strategies to maintain your financial stability in the long term. Yet, many households struggle when it comes to building a profitable and meaningful investment portfolio. Indeed, most investors opt for real estate investments as a priority because properties are tangible assets, unlike cryptocurrencies or stock exchanges.
Yet, the property market offers more than one option for investment. Should you flip houses, let properties, or renovate for a profit? We recommend starting a rental side hustle to guarantee long-term, reliable secondary income. Here is what you need to know before launching your rental venture:
#1. You don’t need to buy expensive properties
The average house price in Canada hits $816,720, which is a record high, according to the Canadian Real Estate Association. For comparison, it’s almost a 20% increase compared to 2021.
However, it is fair to say that prices can vary greatly depending on the region. Toronto and Vancouver are the most expensive cities in Canada. Removing listings for both these locations reveals a different average property price of $178,000.
Nevertheless, as a homeowner, you may not be ready to invest a large amount of money to purchase a secondary property. That’s where solutions such as mobile homes from Top Notch Homes can be a game changer for aspiring landlords. Houses are more affordable without compromising on any of the essential facilities for comfort and functionality.
#2. Have a financial adviser
Is a rental business profitable? In theory, yes. However, in practice, the answer may vary greatly depending on:
- How much you need to borrow for the purchase
- Land transfer taxes and mortgage default insurance fees
- Potential rental income vs. costs
- Tax deductions
A financial adviser can help you maximize the value of your rental property and maintain your cash flow.
#3. Promote your rental online
Your rental side hustle can benefit from having an online presence with a professional website. Indeed, you can use the website to get found easily through SEO best practices, ensuring you can rank for relevant search terms. Besides, it is a great way of showcasing the property through a gallery photo or even a filmed tour.
#4. Don’t run it by yourself
Unless you can afford to be available when and where your tenants need you, you should seek assistance managing your rentals. A professional realtor can provide all the necessary services:
- Screening tenants
- Drafting tenancy agreements
- Managing tenants’ payments
- Managing queries
- Arranging repair works
- Organizing visits
- Taking professional photos
#5. Research the best financing options
Buying a secondary property could expose you to different mortgage types compared to a primary property. For instance, homeowners are expected to make a downpayment of 5% of the purchase value. But when you buy a rental property, you may need to pay a minimum of 20% of the house value in downpayment.
Additionally, you may need to decide on your amortization period, aka how much you want your monthly payment to be based on your rental income.
It is often easier and cheaper to work closely with a mortgage broker to finance a rental.
Becoming a landlord can be the best financial decision you can take. Rental property investments are profitable and provide a long-term, reliable source of income for the household. Yet, you need to make strategic decisions to maximize your wealth.