Have you ever considered becoming a landlord? When you have a good rental property and good “qualified” tenants, it can be a fantastic opportunity to create some passive income and also build your nest egg towards retirement. The income generated after expenses is not going to make you rich overnight, but it is a great way to add an additional income stream and also build equity in another property outside of your principle residence. But before you rush to buy an investment property, here are 4 things you should consider before becoming a landlord in BC.
The Financials
Before you invest, ensure that you aren’t stretching yourself financially to make the purchase. In this market, prices are high and margins are thinner than ever. Make sure that you are still able to set aside savings for a contingency fund for potential vacancies or unforeseen repairs – which are part and parcel with owning a rental.
Managing The Property
Although this is entirely a personal preference, it’s fairly common to manage your own rental properties until you own several. Professional management companies typically charge 5-10% of the monthly or annual rental income to attract & screen new tenants, oversee maintenance & repairs, resolve disputes and manage financial records.
Review The Residential Tenancy Act
Regardless of the investment, big or small, you need to have a solid understanding of the BC RTA’s laws and the numerous forms required to begin a new tenancy agreement. Be sure to review your rights and limitations as a landlord and those of a tenant in order to ensure that you are one step ahead of possible disputes.
Inheriting Tenants
So you’ve found the perfect property, but you don’t love the existing tenants. Unfortunately they come as a package deal! Under the RTA, a prospective purchaser must take on the existing tenancy agreement(s) set between the previous owner and the current tenant(s), including the monthly rental amount. In order to keep the rental income at market value, landlords can continue to increase the rent annually according to the allowable percentage set by the provincial government or once a new tenancy agreement is signed.
As a landlord myself, I could go on for days on with the subject of investment properties, but these are the basic topics I encourage anyone to review before committing to the rental experience. Becoming a landlord can be a highly rewarding process and if you are looking for specific details or information, please feel free to give me a call and pick my brain. I’m always happy to answer any questions you might have or share an honest opinion of our personal experience!
For more information & resources for owning and managing rental housing in BC, you can also visit Landlord BC.
