So, you want to get into the rental market. You’re looking for an investment opportunity to help you build your wealth with a bit extra on the side. In your eyes, the easiest way to do that is buying another house, and renting out. After all, owning a rental property is easy, right?
Truth be told, no, being a landlord is not easy. It’s another job, and you need to be ready to make the necessary investments to repair that rental property when things go wrong. You are responsible for the quality of the home.
If you have a plan to pay for the house and build a budget for repairs, then you’re in business. You just have to find the best house to fill in the gap. What kind of house should you look for? One you would want to live in that checks off all the boxes for the perfect rental property.
Rent to Price Ratio
You want to make a budget for your home. Figure out which house is in the budget, and go from there. To do so you might want to look at the rent to price ratio. You can find areas that have rent set at nice prices, and look for homes there. If you can get a nice house for $200,000, you could rent that out for a lot more than the mortgage is worth. Say you get that $200,000 house in the right area. It has huge open spaces and plenty of rooms for the family. For you, the mortgage prices are roughly $1000 a month, but with the potential to rent houses in Calgary anywhere from $1500 to $2500 a month, you have some room to make it work. Just check around the area the home is to see what your rent prices could be. If you find a few options that are similar to your house, you can get a range and pick a rent price for the property.
Think of the 80-20 rule on this one to see if you are on the right track for your investment minimums. You can put 80% of monthly rent into the property and take 20% as a profit, you are doing great. So if you have 50% as the mortgage payment, you should have the other 30% of the rent as a fix-it budget. That money will start to stack up in case something major breaks in the house. Something like plumbing or foundation issues can turn a great opportunity to bust really quickly. That fix-it budget could help you get out of a tight situation with a swift repair. Of course, these are just suggestions, but if you can’t beat those numbers, it’s probably not the right house.
Big Rooms, but Not Too Big
If you want to get a house and attract longer staying tenants, you will want to make sure you have space. Typically, you will see people who need a large amount of space rent for longer periods of time. Whether it’s a family or an upstart company, longer contracts can help you secure lines of income for certain periods of time. Squarefeet is the name of the game here, and utilization of space is a keep to getting long term tenants.
Washer and Dryer Hookups
This is a big one, and not every house has washer and dryer hookups. You really need to make sure your rental does, and that it’s in a convenient location. If you the house you are looking at has the washer and dryer next to house, it’s automatically going to be that much harder to sell to tenants. Sounds silly, but trust me, it can make a difference.
A Garage
We live in Canada, so a garage is a must-have feature for the perfect rental. If you can provide your tenants with a garage to house their cars, they might just stay forever if you left them. Keeping your car off the roads when the snow hits is really important for the life of a vehicle.
Newer HVAC Systems
If the heating and cooling have been recently updated, that’s a good sign. Of course, you need to check they work and make sure the HVAC system is good at its job. Try kicking the heat on to warm the house up a few degrees, and turn on the air to see how it does making the house cool again. You don’t need a lot of time to test this, and 5 degree is all you need to see how the HVAC system is working.
Finding the Perfect Rental Property is Finding the Perfect House for Someone Else
If you find a great deal on a house that you can’t seem to pass up, you can always use the property as a rental. Making money through your investment can be easy if you pick the right house and keep maintenance costs down.
Maybe you aren’t ready to field the complaints from your customers. That’s ok because you can work with a rental management company to help with communication between you and the tenant. Many of them offer great deals for monthly fees. They can help you find tenants, field maintenance requests, file paperwork and ultimately help you keep tabs on the rental property. This is a great option for those looking to use realty as an investment opportunity with the hassle of managing the actual renting process.
If you need help finding a great house, Hama Cazac Real Estate Group can help you find the best houses on the market. Whether you’re buying for you or investing in a property opportunity, we can help you find the perfect home to suit your needs.