Should you buy a condo to rent out? Our Realtors weigh in
Real estate investment is the hot topic around the water cooler these days and many people are considering investing in a rental property as part of their retirement fund. But should you buy a condo to rent out? What kind of return can you expect to generate on that property investment?
- Property maintenance, exterior repairs, most plumbing, some utilities (typically water), and other aspects of the building maintenance are included in your monthly condo fees.
- Lower purchase cost than a single-family home.
- Great locations increase your pool of rental applicants with everyone from students to retirees applying for in-demand buildings and neighbourhoods, such as Downtown Kelowna or the South Pandosy area.
- While not common, a condo board can impose new rules and bylaws, including the restriction of rentals in the building.
- A large repair can force the need for a special levy, raising your monthly condo fees or putting your on the hook for thousands to cover your share of the building repairs. Of course, this now eats into your profit.
- Condo values and prices typically increase at a much slower rate than that of single-family homes, so you won’t walk away with as much equity as you might think.
What you need to know before you buy a condo to rent out
If you’re buying a condo to rent out, you really need to factor in all of the expenses. In addition to your monthly mortgage payment, you’ll also need to consider strata fees, insurance, and property taxes. You should also set aside a few thousand dollars for repairs or legal fees in the case of a bad tenant.
Once you’ve tallied up all of those costs, you’ll need to set a rental rate that covers your costs and, hopefully, still leaves you some extra at the end of each month. If not, then your investment will be solely in the equity of the property.
The key to becoming a successful landlord and property investor is to select the best possible tenants. To that end, consider lowering your rental rates to create more competition and entice the best possible tenants. A bad experience with a renter can cost your thousands in damages and unpaid rent, not to mention potential legal costs. But if you find great, long-term tenants and you take care of them, you’ll be on track to make a solid return on your investment.