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If you’re buying a property as a rental investment, your success will lie in picking one that can consistently remain tenant-occupied, adding to your equity every month. Here the top 10 factors you should keep in consideration when searching for a hot deal.
Location and Neighbourhood:
As a landlord, you’ll quickly realize that location is your investment’s prime selling point. The quality and features of the neighbourhood you buy in will directly influence the value per square meter of your unit. If you’re investing in a family home, make sure you pick an area that is quiet, safe, and conveniently accessible by public transport. If you’re investing in a condo, choose one that is as close to the downtown core or business district as possible.Read more about neighbourhoods and value here.
Property taxes are not standard across the board and, as an investor planning to make a passive income from rent, you want to be aware of how much you will be spending in taxes.
To be a good investment, a property needs to be an asset rather than a liability. A smart investor will factor in all the short and long term costs, including welcome taxes, land taxes, school taxes, and municipal taxes to determine whether the unit will put money into their pocket every month, or whether it will take money out. For an easy breakdown of how to calculate net income, read our post on identifying a good investment opportunity. Then, use our mortgage calculator and our ROI Calculator to break down the specific short and long term costs specific to Montreal.
If you’re investing in a family home, finding a property that is close to a good school is essential. Many families choose their homes primarily on proximity to their children’s school.
Luckily for investors in Montreal, crime rate is relatively low throughout the city. Still, choosing a borough that has a good reputation and where your tenants will always feel safe will increase your odds of having your unit rented at all times.
Locations with growing employment opportunities tend to attract more people – meaning more tenants. This doesn’t necessarily mean you have to restrict your vision to the Downtown core. In Montreal, hubs of opportunity occur in the peripheral areas with the development of new super- hospitals, industrial sites, and research centres. For example, read about the real estate opportunities surrounding Montreal’s MUHC hospital here.
Building Permits and Future Development:
Before making any investment, look into the urban plans for the street and neighbourhood you’re planning to buy in. If there are many new condos, business parks or malls going up in your area, it is probably a good growth area. However, keep in mind that a lot of new condo developments will also mean competition for your rental unit.
Surrounding Listings and Vacancies:
Are there a high amount of vacancies or units for sale in your building/area? If so, this should be a warning sign that triggers you to finding out why. It could be that vacancies are explained by seasonal fluctuations. For examples, in residential areas close to major universities (read: the Ghetto, Bishop Street, Uqam), units tend to lie vacant during the summer holidays.
Average Rental Prices:
What is the going rental price in the area? What is it projected to be in the next 5 years? These figures will help you calculate your cash flow and decide whether your income will cover your expenditures.
The Property Features
In general, the best investment property for beginners is a residential, single-family dwelling or a condominium (Torn between the two? Read this post…) Condos are low maintenance but tend to appreciate more slowly than single-family homes. The best condo investments are made into buildings that offer great amenities. When competition is cut-throat between rental units in your area, the fact that your building offers a gym, terrace, and indoor pool will make all the difference. Also, don’t buy a unit without a garage. In Montreal, any corporate client looking to pay over 1500 a month on a condo will probably not want to spend their mornings shovelling snow.
If you opt for a single-family homes, choose a unit with 2 bedrooms or more, and one which has a yard or exterior patio area. Keep in mind that the best investments are ones that do not need extensive cosmetic or structural repair.
In general, when buying an investment property, you should be putting all personal tastes aside and choosing units that will appeal to the mass market. This means: light or neutral coloured walls, natural sunlight, wooden floors, and clean, uncluttered decor. If you don’t plan on doing extensive renovation, choose an option that is already suited to the aesthetic of a staged home. Open spaces, big windows and open concept kitchens work best. Read this article for a summary of the home staging principles.