EXPERT ADVISE FROM YOUR TRUSTED PROPERTY MANAGEMENT TEAM
Purchasing a rental property in the GTA and Ontario is a big investment. With effort and careful research it can be a great source to generate money. Considering purchasing a rental property and wondering if it is the right for you? We have 5 things to consider before purchasing a rental property.
What is your financial situation?
Financing a rental property is a bit more complicated than purchasing a typical mortgage. According to financial institutions, your financial situation should be considered before purchasing a rental property. The number of units purchased and whether you would be occupying a unit within the property, all play a factor on financing. Ensure there are adequate funds for a down payment and operating costs. You could put as little as 5% down, however if occupying a unit 20%. Here is a guide of how much is required in the GTA and Ontario.
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Who will you manage the property?
Maintaining a property investment is a lot of work and may be too much to handle by yourself. However, sourcing a property management company to handle the logistics of a rental property is a great option. A property management company manages tenants, collects rent and lastly handles all maintenance on the property.
Location is key
Research the area that you are considering purchasing in. Get in the mindset that you are purchasing a business and how you will want to generate interest from potential tenants. Point out the infrastructure and amenities that surround the property, while considering if that will attract the right tenants. There are a lot of great locations especially in the GTA and Ontario.
Is a rental property and real estate investment a right fit for you?
There are many great opportunities and rewards when investing in a property, however do not neglect the potential risks involved. Ensure that you will be able to secure a mortgage, budget and cover operating costs, and secure tenants who will pay rent on time and be respectful to your property. Guarantee that you have safety funds for unforeseen maintenance or unoccupied units, as these are issues that can deplete your profits quickly. Nonetheless, overtime a well-managed property can yield to a great investment and you will be able to see your equity grow.
Consider the taxes that are involved
A rental property is subject to multiple areas of taxes that you need to be aware of. Taxes to consider are:
- Income Tax – rental income is added to your yearly income and therefore will need to be claimed in your taxable income.
- Land Transfer Tax – this is paid to the provincial government after the transaction of your property closes. However, if purchasing a property in Toronto area you will also have to pay to the municipal government.
- Capital Gain Tax – this will occur when you are selling your investment property. The tax is determined by the cost of purchasing your investment vs what you sold it for, minus any expenses that occur such as real estate fees, land transfer tax, and legal fees.
Looking to hire a Property Management company to manage your property in Ontario? Consider hiring ACCL Property Management. For a free consultation, please email us at firstname.lastname@example.org or call us at 905-432-8961