So you have decided to purchase a Montreal Investment Property…
1. Is it the right time to buy?
The norm as of the past few years in the Montreal Rental Market is that it is busy & properties are in high demand. You still need to have your finances lined up most importantly before deciding to purchase & deciding on which investment property to purchase. Keep in mind, the purpose of buying an investment property is to get the tenant to pay your mortgage. Are you in a position to subsidize the monthly payments (mortgage / property taxes / repair & maintenance etc.) where your rent does not sufficiently cover it all?
2. Finding the right Realtor!
Finding an experienced Realtor who understands the rental market and investment aspects involved in this type of purchase is key. You really need to trust the Realtor who will be there from start to finish in assisting the true pre-qualification process of the investment properties. The Realtor you select to work with should have experience in selecting investment properties with clients and be organized regarding the true pre-qualification of the subject properties. Remember, this is a completely different equation from buying a principal residence. He or she should be able to qualify what style and taste in real estate you are looking for. Additionally what the rental market of the products you are looking for looks like & what the long-term life of the building looks like. This is most important as it is an assessment with efforts to try to minimize investment properties with future assessments potential.
3. Where do you want to buy?
The selection of where exactly to buy is a very important one. What will draw your tenants to the neighborhood & what will make them pay top dollar for that neighborhood. Are you looking in the heart of Downtown Montreal? Are you buying outside of Downtown? If so, are you buying in a neighborhood close to a transit stop or in the center of a neighborhood where there is simply nothing close? How far from a main street for shopping purposes, are you buying? All of the geographic decisions you made for your own Real Estate needs, you are now selecting the same things for day-to-day needs of your future tenants.
4. What are the actual costs to invest?
Before purchasing, find out all of the real costs of the investment. The realistic rental rate you can expect if currently vacant or the current rate the property is achieving for rent. Take into consideration you costs (Mortgage Payments, Property Tax, Assumed repair & maintenance, possible vacancy between tenants etc.). Are you intending to hire a management company to run the investment for you day to day? The majority of Buyers we are seeing these days are purchasing investment property where after all of these costs, the investment in negatively cash flowing. Is this a situation you are comfortable being in? Is this a situation your mortgage broker is comfortable to lend on? Also keep in mind that depending on your mortgage term, your numbers will change. In addition, depending on what you are charging for rent, you may have some gap months in your year when trying to fill the property at a top rate. Always remember, it has always to take a little less from a reliable tenant than a little more from an unreliable one.
5. Property Managed or Self-Managed?
This is a clear decision for some and not so much for others. Many experience investors that I deal with simply include the cost of Property Management into their equation from the start. Knowing the stress & time it can take to keep the investment going, they avoid this all together. In contrast to a lot of first time, investors try to do it themselves at first before they really get a sense of what is involved. The majority of the time this is quickly followed by getting burnt out & inevitably getting a management company involved. It is up to you as the property owner of course & all depends on how stressful or not the investment is for you.
6. Selecting the right building.
Some buildings will have amenities and some will not. The buildings that have more amenities will inevitably cost more money. The buildings without amenities may not be as luxurious but will be much more straightforward with expenses. As they have less. Are you buying in a building that is going to have possible assessments in its future? If so, that is normal, but has to be worked into the financial return equation of the investment. If this is a building, that has possible foreseen assessments in its future or not, we would suggest budgeting for them anyways..
7. Studio, 1 bed, 2 beds, townhouse, or detached.
Do you know what caliber tenant each of these product types will award you? Is it better to spend your budget on a high end 1 bedroom or an entry level 2 bedroom? What is more economical & what will give you a better rental base to choose from? High-end bachelors or young families, who do you, want to deal with. You can also use a management company’s insight to make this selection. Speaking to a management company & your Realtor you will be able to paint a clear picture of what can reasonably be achieved for rent for any given property. In addition to the insight if it could rent for more as a furnished Rental or unfurnished & what those two different equations would actually look like.