Tips to Avoid Pitfalls in Owning An Investment Rental Property
Owning and operating an investment rental property can provide a number of important advantages. There are potential disadvantages to owning a rental property; however, you can help to minimize possible pitfalls by following certain guidelines to protect your investment.
First, always make sure that your expectations regarding investing in a rental property are reasonable and realistic. You should always approach the investment of a rental property with the goal of achieving a positive cash flow; however, do not expect that you will be able to buy a new vacation home within a year.
In addition, it is important to make sure that you take the time to do your research and ensure that you understand the rules and regulations regarding the ownership and operation of a rental property. As the owner of a rental property, you must abide by certain federal and provincial laws which provide specific information regarding your liabilities and responsibilities
Along those same lines, it is important in Ontario to use the standard lease that all landlords are required to use. If you handle a lease or rental agreement which is not legal, you may experience a number of problems if your tenant happens to violate terms of the lease. To be safe, you can get the assistance of a paralegal to add any extra terms in appendices.
Before purchasing any rental property, be sure to have the property inspected or else you may discover you are facing a set of expenses you did not anticipate. Having the property inspected by a professional before you sign on the dotted line will involve an expense; however, compared to the expenses you could face by purchasing a property without an inspection, it is certainly well worth it.
When you begin the process of renting out your property, take the time to run credit checks and call references. These are both steps which many novice landlords often overlook in their rush to fill their rental properties and begin turning a profit; however, it can be detrimental. Remember that having an empty unit is always better than rushing and having an irresponsible tenant who may destroy your property, get behind on their rent and ultimately prove difficult to evict.
Joining the Landlords’ Association in your local area can also prove to be helpful by putting you in connection with experienced investors and landlords. You can also gain access to reliable contractors, inspectors and other professionals who can make the process of operating a rental property much easier.
It is also imperative that you make sure you have adequate property insurance as well as liability insurance. Property insurance will help to protect your investment while liability insurance will protect you in the event anything should happen to someone while on your property. It is also important to make sure your tenants have their own insurance as well
Finally, make sure you take the time to establish an emergency fund in order to cover expenses which may crop up unexpectedly. Remember that you are operating a business and as such you must be prepared for those times when expenses arise. The exact amount that you wish to contribute to your emergency fund is ultimately up to you; however, it should be sufficient to cover typical expenses that may arise. To make the process of establishing an emergency fund easier, consider setting aside a certain amount of your rental income each month into a special account.
investwithcaroline.com is a real estate investment company. We have been actively involved in the Ontario area real estate investing for a number of years. Our mission is to provide quality housing for quality tenants, while at the same time providing an above-average return on investment (R.O.I) for our investor partners and ourselves. It is truly a win-win-win way of investing!
Caroline offers her investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Caroline.
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