So your buying a rental property….

Investing in real estate can be a great choice when you are looking for long term appreciation and cashflow. However, buying a rental property is slightly different than buying your own home.

What you need to know when buying your rental property

The first thing you need to remember is to stay objective. You are not going to be living in this property so you do not need to “love” it. It is all about the numbers and whether or not it makes sense from an investment point of view. You need to ask yourself “will I make money on this purchase”

You also need to be aware of the costs associated with purchasing a building over 4 units. You can expect everything to cost more:

• CMHC will charge you a per unit application fee, plus a higher premium
• You will have higher legal fees, plus you will most likely be required to pay for the lender’s legal fees as well
• You will most likely have a lender fee and be expected to pay some of it up front as good will
• There might be an environmental report required
• The appraisal on a multi-unit building can be $1,000-$2,000 depending on the location

All of tis adds up to a more expensive transaction than when you purchased your home. Keep in mind most of these expenses can be written-off and you have to take them into account when looking at the profitability of your investment.

Most important of all is to be sure you are working with an experienced team. Your Realtor, Mortgage Broker and lawyer should all have experience in larger investment properties and be able to guide you through the process.

Related articles

• Top 10 features of a profitable rental property (theglobeandmail.com)
• What is property rental yield (wiki.answers.com)
• Why did I think being a landlord was easy money? (moneyville.ca)

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