Scott McGillivray is a real estate expert and host of HGTV Canada’s Income Property and Moving the McGillivrays.
Buying a rental property is a big deal, no doubt about it. But over and over again I hear people perpetuating myths that just aren’t true. If you’re thinking of buying a rental property, educate yourself with the right facts, and erase these 10 myths from your mind.
1. It’s Not the Right Time to Invest in the Real Estate Market
People are always trying to predict the market and figure out whether it’s a good time to invest. In my opinion the best day to invest in real estate was yesterday, the second best day is today and the worst day is tomorrow. When it comes to real estate investing it’s not about timing the market – it’s about time in the market.
2. You Need Prior Training
One of the most common myths I hear about real estate investing is that you need to have business training or previous experience to be successful. I couldn’t disagree more. When it comes right down to it, all you need are basic budgeting skills and some common sense.
3. Rental Properties Provide Passive Income
I’ve been quoted as saying that income properties provide passive income, and while it’s true in a general sense, don’t think that you can just sit back and wait for the cheques to roll in. Being a landlord requires your active participation in managing the property, the finances and the tenant(s). Even the simplest unit will require a little effort on your part.
4. Rental Properties Take Too Much Work
We’ve established that rental properties take some work, but do they take too much work? Not for the rewards you get from a successfully cash flowing property. One of the great things about investment properties – particularly secondary suites – is that you don’t have to work at them every day. So while you will have certain responsibilities, you can keep making money even on days when you’re not there.
5. All You Need to Start is a Down Payment
There are many costs associated with running a rental property including insurance, taxes, maintenance, repairs and so on. A cash flowing property is a great investment, but even so, having money set aside at the start for the general running of the property is a must.
6. You Need to Own a Primary Residence First
If you’ve got an inexpensive rental apartment it might make sense to buy an investment property that can start making money for you before you buy your own home. Then you can use the money being brought in to purchase something for yourself. Look at all your options before making a move.
7. The Property is Guaranteed to Increase in Value
Real estate is like a yo-yo on an escalator: it goes up and down, but ultimately it’s always going up. That said, buying a property and waiting for it to increase in value is not a great strategy. You need to maintain it, make value added improvements, and as a landlord, ensure that tenants are behaving and respecting the property. A neglected rental property can end up being a money pit instead of an income generator.
8. It Needs to be Close to Your Primary Residence
Proximity is great, but not a must. There are some easy ways to make sure properties are kept up and kept safe without you being close by. Smart home technology is great for controlling temperature, lights, locks and so on. And if you’re at all uncomfortable about being so far away, a property manager is always an option.
9. You Can Get Away with Using Inexpensive Finishes
If you want a successful investment with quality tenants you can’t get away with cheaping out. It’s important to have decent quality items that look good and won’t fall apart. Remember, the calibre of the property dictates the calibre of the tenant.
10. You Can Rely on Tenants to Maintain the Property
Some property owners might want to give tenants a break on the rent in exchange for doing certain things around the property. While it’s a great way to get a few things taken care of, it does not mean that you can rely on tenants to maintain the rest of the property. It’s your investment and your responsibility to make sure everything stays in tip top shape.
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