A cash flow positive rental property in British Columbia is kind of like a pension plan and an insurance policy. It’s also important to get the best mortgage rate possible by consulting a mortgage broker.
Renting out an investment property can pay off for both landlords and tenants considering the prolonged rental housing shortage and growth in real estate values in Vancouver, Surrey, and other municipalities.
On a practical level, would-be landlords need to address several key items to become “rent-ready.”
- The rental unit should be freshly painted and have new flooring if the existing floor doesn’t show well.
- Ensure working smoke alarms and carbon monoxide (CO) detectors are in place;
- Screen prospective tenants by calling previous landlords, personal references and employer, getting a credit report and asking to see pay stubs;
- Use the standard tenancy agreement (lease) required by the British Columbia government;
- Use Provincially-approved forms for serving notices;
- Both landlords and tenants should have liability insurance.
- As an owner, consider updating your Life Insurance to account for the new mortgage.
Budget for “annoyances” such as late payments, pet-soiled carpeting and repainting the unit.
Consider if you make $200 to $300 a month in rent money, record the income and associated expenses on a spreadsheet. Remember, profits are considered a taxable gain, but the mortgage interest you pay can off-set that.
Jaret Forman is a licensed Surrey, British Columbia mortgage broker available to help you through the process of purchasing a rental property. He can show you how to use rental income to qualify for mortgage and give you a comprehensive financial overview.