For Canadians who can’t afford to buy homes in some of the country’s most expensive real estate markets, purchasing real estate in more affordable markets while still renting in their current locations can be a good way to break into the market.
The strategy – known as buying-to-rent – is an ingenious way to ride out the ups and downs of the property market and the economy, according to Ann Kaplan, CEO and president of iFinance Canada.
Kaplan, who gradually built a portfolio of seven residential and commercial properties in Toronto, Vancouver, and Victoria, has some practical advice for those who want to start buying investment properties as a means of climbing up the property ladder.
1. Decide what price you want to pay and stick to your guns.
When you’re buying investment property, you’re not in a rush to find a place to live in, Kaplan said. Hence, you should conduct your research, get your paperwork in order, and put forth the price you want to pay to the seller. If the seller won’t agree to your price, be prepared to walk away.
This strategy has helped Kaplan get very good prices for her investment properties.
2. Start small and expand your portfolio as you gain experience.
Kaplan started out knowing next to nothing about property investment. She took baby steps by renting out a single property in Vancouver as she and her husband weren’t sure at that point if they would settle there or in Toronto.
After that foray, she proceeded slowly and asked more experienced investors lots of questions, often asking them to share their expertise with her.
3. Get good tenants and keep their rents stable.
“A very good tenant is key,” Kaplan said. Once you find a great tenant, make every effort to keep him or her happy. This means keeping their rent stagnant for as long as possible.
Kaplan also allows her tenants to address small repairs without checking in with her, and to dock any expenses from their rent cheques.
4. If you’re buying in a condo, make sure you’re on the condo board.
When considering a condo purchase, check the building’s bylaws to ensure that renting is allowed and has never been an issue, Kaplan advised.
Bylaws can change quickly, as do the wants and needs of the occupants of a building you won’t be living in. To stay abreast of changes, Kaplan said it’s important to make sure you’re on the condo board. This way, you’ll have a hand at the table when it comes to making decisions and can stay updated on legislation.
5. Think of property investment as a long-term venture.
You buy investment property so that it generates income for you later on. Hence, you shouldn’t worry too much about fluctuations in the market along the way, Kaplan said.
Every year, use the rental income you’re collecting to make the maximum advance payment on the mortgage that won’t incur a penalty. Once you’ve paid off the mortgage, you can use the equity to purchase another investment property.