Mortgage Blog

Are You Ready to be a Landlord in Maple Ridge & Pitt Meadows?

September 23, 2016 | Posted by: Tania Kalinich

With the Lower Mainland real estate market booming the way it is, you may find that you have a substantial amount of equity in your home or are thinking about buying a property for investment. There are many theories on what to do with equity in your home; but one common question I get from clients is: Should I take equity out of my home to buy a rental property? My personal opinion on the matter is yes, and this is why:

1. Potential increased cash flow – depending on how you structure your financing you could see an income source from the rent received.
2. Asset appreciation – even with property values going up and down real estate has always seen an upward appreciation over time.
3. Building equity – principal paydown by someone (renter) other than you! What’s better than that? Someone else is paying off your debt and building your equity.
4. Tax Benefits – you are able to write off expenses associated with the property. Closing costs, insurance, home office, and the list goes on. A good accountant will advise you on the many ways this can be done.
5. Gets your money sitting in your home at 0% interest working for you.

Things to consider before purchasing a rental property:

1. Will I have the amount needed to purchase a rental property? The Canadian government has regulated financial institutions to a min. of 20% down payment. Many lenders now require a min. of 25-35% down to avoid high ratio insurance premiums. Between cash and equity in your principal residence you will need to ensure you have enough funds.
2. What will the payments for the equity from my home be along with the new mortgage? Will this be enough to cover the monthly expenses of the property? Will there be a surplus or loss?
3. Can I be a landlord? There are challenges in being a landlord. Choosing the right tenant that will take care of your property and pay the rent on time. Upkeep of the property. You do have the option to hire a management company at a cost that will help alleviate some of the stress that comes with rental properties.
4. Are you prepared if there is a vacancy? There could be times where you have the unit vacant. You need to be prepared in case this occurs.

Keep in mind this is not for everyone, but many people don’t realize the options they actually have with built up equity – Did you know you may qualify for a rental property mortgage? Being able to use rental income to offset the payments on the new mortgage make qualifying simpler and will open doors you didn’t know you had.

If you think buying a rental property might be for you, give me a call and I would be happy to take your information and help you determine what you would qualify for and what those numbers would look like.

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