One of the best ways to expand your cash flow is through passive income. You can make money while you sleep by putting your skillset to the test and creating something that people will be eager to own and use, be it a video game or a great new app. However, nothing can beat investing in real estate. It takes a lot of effort, knowledge, luck, and, let’s face it, it takes some guts as well. While the coronavirus pandemic has undoubtedly affected the real estate market around the world, investing in a rental property in Canada can be a sound business move. Still, knowing both the pros and cons can assist you in making an informed decision.
Get to know the market
It’s a good idea to be familiar with the surroundings you’re about to become a part of. Especially if you don’t necessarily live in Canada or close to the area of your choosing. There’s a lot of ways you can do this:
- Ask your friends
If you’re not a complete beginner when it comes to finances and investing, it’s likely you’ve made some friends and acquaintances along the way. When investing in a rental property in Canada, it would be smart to sit down and discuss some good strategies over a cup of coffee.
It’s a good idea to ask your friends for tips on how to invest in a rental property in Canada.
Alt: Two people talking.
- Look it up
There’s an abundance of sites that deal with this sort of thing. Access to some of them is free, but it’s smart to think about splurging on those where that isn’t the case. Chances are, you’ll get the information you wouldn’t have otherwise.
It’s the people that have already gotten to the point you’re trying to reach that share their experiences in books. If you’re a complete rookie, there are great books such as ‘Rich Dad, Poor Dad’, to get you into the right mindset. When you’ve achieved this, it’s time to start looking into some books about fact-based investment strategies.
You do you
When thinking about buying a rental property, people cannot escape a certain mindset. They have a tendency to make every decision based on what is in right now and what’s going to sell fast. This is a very common mistake when investing in property, and you should avoid making it, especially if you’re a first-time buyer. When investing in a rental property in Canada you should think about your needs and wishes instead of only focusing on what sells at this moment. Essentially, while you will be renting out the property, you’re buying it for yourself. You’re going to be the owner of this home and therefore it’s quite important that it fits all your standpoints.
The pros and cons of investing in a rental property in Canada
Canada is one of the best places in the world you could be investing right now. This is because it’s also one of the best ones to live in.
- Free healthcare and education
This is one of the best reasons to move to Canada, which is why so many people choose to do so. It makes this country an attractive location for anyone coming from abroad, and potentially, renting your property.
- Getting a steady flow in your bank account
This one is pretty self-explanatory. Considering your contract will be somewhat typical, which it actually should be, you’ll have a steady monthly income. This gives you room to explore other interests or hobbies, as you won’t be worried about your monthly expenses.
Investing in a rental property in Canada means a steady monthly income.
Alt: Stacks of coins.
- Taxes be gone
Let’s say you’re planning on moving from New York City to Canada with ease, your taxes would already be cut in half. If you, on top of that, rent your place out, you’ll have hit a double gold mine when it comes to paying taxes. They will be significantly reduced because you’re practically sharing them with your tenant.
As with anything in life, there are some downsides to buying rental property in Canada.
- The coronavirus pandemic
Although the COVID-19 pandemic seems to be slowing down, you still might face some issues as a landlord. For example, if there is another wave of the virus, your tenants might not be able to leave due to the lockdown measures. You might also have to allow them to pay their rent late or give some other form of relief.
- Badly behaved tenants
Unfortunately, you can go follow all the laws and regulations when making an arrangement with your tenant, but end up having to deal with a difficult person. This is all the more reason to think long and hard when investing in a rental property in Canada; don’t let yourself get fooled into something that doesn’t work for you.
- The unpredictability of the market
It’s hard to predict the rise and fall of taxes and property values. If you could somehow manage to predict them, you’d need to react perfectly in order to stay above or even maintain a certain monthly income.
What is the purpose?
Having said this, it’s equally as important to think about what sells and what you’ll be able to rent out. There’s a huge variety of factors that can make or break your investment.
There are a lot of doors that open for you after you invest in a rental property in Canada.
Alt: A lot of doors.
There’s no sense in having this awesome space with great potential if it’s so far away from civilization. If you were the renter, let’s be honest, you’d much rather consider a decent house with a great location than an awesome house far from everything you need. Therefore, when purchasing a rental property in Canada, don’t allow yourself to get tricked into a well-staged home that looks idyllic but is in fact in an awful location.
Go for quality over quantity
At some point in our lives, we’ve all dreamed of having a huge mansion with an amazing view. In reality, this idea is not so much a dream as it is a nightmare. You wouldn’t even think about the responsibilities that come with owning a place like this. Talk about high electricity bills and enormous tax fees. Invest in a rental property where you’ll be able to have the space that you’re actually in need of, with maybe some room to grow.
Think about the final intention
If you’re investing in a rental property in Canada just for the sake of spending your riches on something that will pay off, that’s great. However, if you’re really considering this as a long term strategy for your future endeavors, you should think about this. Instead of renting out your property to a family, consider investing a bit more to gain significantly more. You can rent your space out to up-and-coming shop or go for the big sharks right away. Just be aware that if you decide to embark on this journey, the location is more important than ever.
Penelope Ames is a freelance author with an interest in all things real estate. She often writes about the global market and hopes to explore her passion in the future. In her free time, Penelope enjoys reading crime novels and going on hikes.