As people begin to chip away at their initial mortgage, it’s not uncommon for them to consider purchasing a second property as an investment rental. While owning an investment property can give you some extra cash flow each month, it’s not without hard work and a little capital. Let’s take a look at some major points to consider before you start house hunting for a second property.
Make Sure It’s For You
When it comes to buying an investment property, it’s important to really do your homework and give it a tremendous amount of thought. Not only should the property you’re buying be suitable for you and its purpose, but so should the role of a landlord. You should look into the required skills, the extra time dedicated to the job and even the costs behind running an extra property. For example, are you handy? When it comes time to fix maintenance problems, not being able to fix them yourself can be a costly job. In the same breath, an overflowing toilet at 2am can be a major interference in your life, but also a vital responsibility to fix as a landlord.
Pay Down Debt First
While adding an investment property may seem like a great way to bring in some extra income, you should work on your existing debt first. You may want to hold off on saving for a second down payment for an investment property and use the money to knock down any debt from credit cards and loans. Taking on a second mortgage can be a big financial responsibility on its own, let alone with the weight of past debt attached to your monthly payment list.
Do Your Calculations
Before you go dropping offers on homes and signing on the dotted line, be sure to do your homework and closely look over your calculations. While an investment property can have potential to bring in extra money, there are a lot of additional costs involved with both the purchase and operation. Be sure to consider closing costs, changes in property taxes, maintenance and operating costs until a tenant has moved in. It’s important that these costs are included in your budgeting, to avoid slipping into any financial hot water.
Avoid A Fixer-Upper
Taking on an investment property can tack on a lot of financial costs, so in order to save money and get a tenant moved in and paying as fast as possible, you will want to avoid purchasing a fixer-upper. Not only can the cost of renovations and maintenance be expensive, it also delays how long you’ll be waiting to receive rent money from your potential tenants. While you’re fixing up the house, the mortgage payments and costs will be your responsibility to cover.
Taking on an investment property to give yourself some extra income is a big decision. While it can offer some financial freedom to you, it’s not without forking out some cash first. There are plenty of costs to cover and considerations to make before you jump into owning a second property and putting on the landlord hat. If you have any questions about purchasing a Collingwood, Blue Mountain or Southern Georgian Bay area home to turn a profit with as a rental property, feel free to give us a call at 705-445-7085. We are always here to help you find the perfect home for your family’s needs or to suit the renters you wish to cater to.