3 Key Points To Consider When Buying A Rental Property In Canada

Posted On October 5, 2021

Purchasing a rental home is an excellent way to supplement your income before or after retirement. However, there are many factors to weigh before continuing. Evaluating the projected profits, costs, returns, and the benefits and risks associated with the property will assist you in making the best of your purchase. Here, you will find three key factors when buying rental property in Canada.

Rental properties in Canada in 2021- “Should I buy a Rental property now?”

Yes! Here’s why-

• The work from home trend ignited by the pandemic has fueled the Canadian real estate market substantially. Willing to relocate to more convenient areas of Toronto to cater to the work-from-home needs, many individuals are seeking to rent a property in the city’s suburbs. Due to this, Houses for rent in Canada, Toronto are in great demand. This directly means more income for owners of rental properties.
• Owing to the upsurge in real estate in Canada, there are more condos for sale in Toronto and Vancouver in 2021 than in 2020, which has led to an increase in the national median rent per square foot. According to rentals.ca, in March 2021, the average rent for rental and condominium apartments in the municipal regions of Vancouver and Saskatoon ranged from $985 to $2,165. Similarly, in the provincial areas of Quebec, Ontario and Nova Scotia, the average rent for a two-bedroom apartment ranged from $1,774 to $1,999. These reports and stats mean that no matter where you are, in the provincial or municipal region or the centricity of Toronto, rental properties are bound to yield generous financial profits.

Moreover, 2021 rental property laws by the government concerning Property Taxes, Taxes on Rental Property, Selling Canadian Property, Home Equity Loans, and Alternative Real Estate Investments have shaped the way for potential rental property enthusiasts.

Now that we have simplified the decision to buy a rental property in Canada, let’s explore the factors associated with houses for rent in Toronto, Canada. Here are three key points to consider while purchasing a rental property-

1) Rental Property Income:

When looking for a rental home, it’s critical to consider whether the property can produce a good income. After all, one of the main goals of purchasing a rental property is to generate revenue from it. To determine if a rental property has a reasonable chance of earning revenue, apply the 1 percent law, which states that the average monthly income on the property should be at least 1% of the purchase price to fund future rental property expenses adequately. When you know the rent that might come your way, it’s easier to manage and tab additional finances.

2) Expenses Associated with Owning a Rental Property:

By default, you don’t get to keep the property’s taxable profits.

It would help if you also thought about the bills you will face as a landowner. The 50 percent rule is a basic guideline for calculating expenditures, which states that you can expect your expenses would equal 50 percent of your total annual revenue from the house. Beyond the taxes and revenue, major expenditures on a rental property can be categorized as-

• Operating costs:

These are ongoing expenditures such as monthly income taxes, premiums, regular repairs and repair products, land security fees, and vacancy costs (the costs if the property goes unoccupied for some time).

• Capital expenses:

These are typically unplanned costs, such as replacing a water heater, air conditioning, plumbing, flooring, fixing a damaged roof etc.

If your total expenditure, as calculated by the 50 percent rule, can seem to cover such additional expenses, you’re good to go ahead and invest in a rental property.

3) Profits by Purchasing a Rental Property:

To calculate your ultimate financial returns or profit from buying a rental property, you can use simple subtraction and division of your operating expenses and gross income. You can measure your cash-on-cash return on your rented property using your total profits and expenses to assess its profitability. The annual capital can be calculated by subtracting the operating expenses from the gross income to get the net operating income, then dividing it by the rental property purchase price (this is excluding mortgage payments. To figure out the mortgage cost, simply subtract the monthly capital expenditures and monthly mortgage payment from the monthly net operating income.) By knowing the estimated profit that might come from buying a rental property, you can proceed with certain and prompt steps ahead, knowing fully well that it might bring you financial benefits. We at Save Max can help, have helped thousands buy the best rental property, we help you make the best investment, we have sold $6 billion real estate.

You may also like: Getting a house for rent in Toronto Downtown in 2021

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In conclusion:

Purchasing a rental property may provide a consistent source of revenue, but as with any purchase, you must first consider what you are getting into. Evaluating the property’s future revenue, costs, and return will help you assess its profitability. Now that the key points to know while buying rental properties are underway, you might as well go and secure that rental estate that you have been eyeing!