10 tips for first-time rental property owners

Buying a rental property can be a great investment.

You build equity while your tenants help pay the mortgage. You open the door to an endless source of passive income once the property is fully paid off. And you can even deduct expenses like your mortgage interest, property tax, utilities and maintenance costs from your taxes.

But while investing in real estate may look great on paper, finding the right property isn’t always easy. If you’re thinking about purchasing your first rental property, here are 10 tips ton help you maximize the return on your investment – and increase your odds of long-term success.

Tip #1: Know your numbers

First, make sure you’re financially ready to become a real estate investor by creating a detailed budget and financial plan that covers all the costs associated with owning a rental property.

This includes regular expenses like the mortgage principal and interest payments, strata fees, property taxes and insurance. But it also means budgeting for less predictable costs too, like ongoing maintenance, unexpected repairs, and the possibility of having to forgo rent for a month or two when your tenants move out.

Tip #2: Do your research

Before you decide what neighborhood or property to invest in, do as much research as you can into your local housing market – and especially what renters in your area are looking for in a home.

What are the vacancy rates in the communities you’re interested in? What’s the average rent for a studio, one-bedroom, or two-bedroom apartment? How many bathrooms or bedrooms are tenants looking for? And have purchase prices been appreciating over the last few years, depreciating, or holding steady?

Tip #3: Learn the rules

The regulations governing landlords and tenants can vary considerably from one province, municipality or even community to another. These rules cover everything from leases and rent controls to how to collect security deposits, screen tenants or issue an eviction.

Before you put in an offer, make sure you know your rights and responsibilities as a landlord. If you aren’t sure where to begin, visit the B.C. Residential Tenancy Branch website, check out your local Consumer Affairs office or ask your REALTOR® for advice.

Tip #4: Get pre-approved

Before you start booking any showings, consider getting pre-approved for a mortgage. Mortgages for investment properties can be a little different from traditional residential mortgages. It’s important to know what those differences are before you get caught up in the excitement of the buying process.

Getting pre-approved will also tell you how much you need to save for the down payment, how large a loan you qualify for – and how much you’ll have to pay in monthly mortgage payments.

Tip #5: Keep it simple

If this is your first rental property, choose a place that will keep everything as smooth and simple as possible

Instead of buying a big multi-unit building or a detached house in the suburbs that needs multiple repairs, look for something like a condo or townhouse that’s relatively new, in good shape, and where the strata will take care of most of the maintenance and upkeep for you.

Tip #6: Location, location, location

As with everything in real estate, one of the best things you can do as an investor is choose a property in an area that’s close to transit and other amenities, and where rental properties are always in high demand.

Buying a home in a rural, remote or up-and-coming location might seem like a bargain at first, because it likely has a smaller price tag than newer or more centrally-located properties. But purchasing a property in a less in-demand location could also limit how much rent you can charge, and make it harder to find the kind of high-quality tenants you’ll want to keep for years to come.

Tip #7: Don’t make it personal

Remember: you’re buying this property as an investment, not to be your dream home. So keep your emotions out of it.

Instead of looking for a place that perfectly matches your family’s personal tastes and preferences, focus on things like which property will be the easiest to rent, which will make the most financial sense for your goals and budget, or which will offer the best overall return on your money.

Tip #8: Get insured

Once you buy your first property, protect your investment by getting the right insurance. Most rental properties need specialized rental property insurance rather than standard residential home insurance. So talk to your insurance broker to make sure you get the right coverage.

Tip #9: Set the right rent

One of the most important parts of being a new landlord is deciding how much rent to charge. Too high and you won’t be able to rent it. Too low and you’ll be leaving money on the table.

To decide how much rent you can realistically ask for, check out the vacancy rates in your area, identify any special features that might make your property unique or attractive, and compare your property to the current rents for other comparable properties nearby.

Tip #10: Screen your tenants

When you’re ready to list your property, take the time to thoroughly screen all prospective tenants. This means getting at least three references and checking them meticulously, running a full credit check, and confirming their employment record and evidence of income.

If you get a bad feeling for any reason, trust your gut, and do some more digging until you’re sure you’ve found someone who will be reliable, willing to take care of your property, and able to pay their rent on time each month.

Bonus tip: Consider hiring a professional property manager

Finally, unless you’re the kind of person who doesn’t mind getting 3:00 a.m. calls in the middle of winter to fix the toilet, you may want to give some serious consideration to hiring a professional property manager to manage your property for you.

In addition to handling all the day-to-day headaches that come with being a landlord, a property manager can help find the best tenants for your property, take care of any repairs, keep you up to date on the latest government rules and regulations – and save you time and money for as long as own your property.