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31 Mar

You Want To Be A Landlord?

Mortgage Tips

Posted by: Yen (Frank) Feng

Are you dreaming about owning a rental property? Did you know there are advantages and disadvantages?

ADVANTAGES of Owning a Rental Property:

  • Earning monthly income
  • Allows you to build home equity
  • Tax deduction on all rental-related expenses

DISADVANTAGES of Owning a Rental Property:

  • Responsibility for maintaining the rental property and managing your tenant(s)
  • Higher tax bracket
  • Unexpected repair expenses
  • Capital gains tax when selling in the future

Need a mortgage? What to Know BEFORE You Buy:

  • Down payment: The minimum down payment is 20% of the purchase price.
  • No gifted money: Down payment must come from your savings.
  • Purchase with equity: You can refinance the existing equity in your primary home to purchase your investment property.
  • Not all can be used: Only a portion of the rental income can be used to determine the mortgage you can afford to borrow.
  • Pay the premium: Interest rate premium can range from 0.10% to 0.20% on a standard 5-year fixed rate.

Final Tips on Becoming a Landlord:

  • Rental insurance: Ensure you have proper coverage for a rental situation and cover any unforeseen events.
  • Laws and responsibilities: Acquire knowledge about the responsibilities of being a landlord in your province, including tenant laws and rental obligations.
  • Research rates and locations: Research mortgage rates and locations before so you are aware of the current market and its potential earning power.
  • Choose the right lender: Ask your mortgage expert so you can maximize your potential.
  • Hire a professional: If you have multiple rental properties, a property manager can be a great go-between with you and the tenants.

With the right purchase price and monthly rental costs, a rental property can be a great way to supplement income. If you are looking to purchase an investment property, be sure to reach out to your mortgage expert to discuss your options.