What Investors Need to Know About Buying an Income Property

November 21, 2022

Buying a rental property can be a great way to generate monthly income, which can be an important part of a retirement portfolio. That said, like any investment, it comes with risks, and it’s not a decision to be entered into lightly. There are several factors to consider before you invest in a rental property.

#1 Can You Afford the Investment?

The golden rule of investing is to never make an investment you can’t afford to lose. When it comes to a purchase as significant as property, that’s a difficult benchmark to clear. If you’re hoping you can rent the property for several years and then sell at a profit, you’re taking a significant speculative risk, especially in this real estate market.

Keeping it as a long-term rental property is safer, but there are still risks, such as:

  • Maintenance costs
  • Unexpected increases to your mortgage payments
  • Tenants who can’t make their rent payments

You should be able to comfortably weather financial setbacks like these if you’re going to invest in a rental property.

#2 What Is the Right Location?

As the old adage goes, when it comes to real estate, it’s all about location. With enough time and money, you can change anything about a property except where it is.

When it comes to rental houses in Toronto, rents have risen from one end of the city to another, but properties that are near a lot of amenities will command top rents. It helps to find neighbourhoods where there’s strong demand for rentals, although with nearly half of Torontonians now renting, there is pretty consistent demand across the city.

Location can also determine the types of tenants you’re going to attract, so keep that in mind as you search for a property.

#3 Take a Long-Term Outlook

If you plan to hold onto a rental property for decades, you’re more likely to turn it into a profitable investment. Even a property that’s breaking even from a cash-flow perspective can be a sound financial investment. You’re building equity, paying down the loan, and increasing the length of time you have to see appreciation.

Plus, once the loan is paid down, all of those payments suddenly become income.

#4 Consider a Landlord’s Responsibilities

Owning a rental property isn’t as easy as just collecting rent cheques every month. Landlords are responsible for maintaining their buildings and finding tenants. That means doing repairs on their own, calling and paying for contractors, conducting credit checks on prospective tenants, and showing units when they become vacant.

If you’re not interested in taking responsibility for another property, you can always hire a property management company, but that will take another bite out of your rental income. That said, it can be less expensive to hire a property management company than it is to sign a bad tenant.

#5 Can You Supplement Income with a Vacation Property?

With the evolution of short-term rental platforms, it’s easier than ever to make money from a second property or vacation property that you use personally. You can buy a cottage and rent it out for periods of the year to earn some extra cash without having to commit to a long-term tenant.

A rental property can be a good investment, but it’s not for everyone. Keep your location in mind, plan for the longterm, find out what a landlord’s responsibilities are, and always make sure the numbers work before you make an offer.


Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts

December 5, 2022
Invest in These 8 Digital Marketing Trends This Year

  Digital marketing has become the most critical element in marketing efforts for any industry in recent years. From retail businesses to rental property investments, every other industry has been positively affected by digital marketing. In addition to being global, digital marketing is also inexpensive and more accessible than its counterpart. However, except for a […]

Read More
December 4, 2022
Oprah Winfrey House: The California Mansion

Who is Oprah Winfrey? Oprah Winfrey is a popular American talk show host. She is also an actress and television producer. Her complete name is Oprah Gail Winfrey, and she was born in Kosciusko, Mississippi, on January 29, 1954. Furthermore, Oprah is famous for “The Oprah Winfrey Show.” She has achieved massive success throughout his […]

Read More
December 4, 2022
Tom Cruise House: Former Beverly Hills Home

Who is Tom Cruise? Tom Cruise is a famous American actor. He is also a producer. Furthermore, Tom Cruise was born in New York on July 3, 1962. His actual name is Thomas Cruise Mapother IV. He is very talented in his field and is considered among the highest-paid actors. Also, he has won numerous […]

Read More


Welcome to Urban Splatter, the blog about eccentric luxury real estate and celebrity houses for the inquisitive fans interested in lifestyle and design. Also find the latest architecture, construction, home improvement and travel posts.


linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram