So you’re thinking of investing in real estate. You hear about future development plans, prices soaring, and people moving on into the island. You’ve read about the low vacancy rates, and the quest for buying affordable homes, you know the demand is high, . But the decision to become a Victoria Real Estate investor isn’t easy, and it certainly gets harder as you start looking to purchase. I won’t sugar coat it for you, there’s a lot of work to do, even moreso if you’re a first time buyer. Being a landlord is tough, and the industry is filled with challenges that can affect returns. I’ve put together a list of my key things to consider when shopping for rental properties.
The quality of the surrounding neighborhood will affect tenant type and vacancy rates. If you purchase a property near a college, the probability that most tenants will be students is high. Knowing that many students come during the school season, and leave during the summer, it’s likely that summer vacancies will occur. On the bright side, you’ll have a large potential tenant market to draw from consistently. So if you’re looking for a hands off gig, with not a lot of turnover you might want to think of a different neighborhood as this would not be a passive investment.
Property taxes vary by municipality, and as a property investor, a buyer should know how much income they’ll lose to taxes. Higher property taxes are not always a detriment if the neighborhood is full of long-term tenants, but that’s not always the case. The local municipality to which your property of interest belongs to will have the local tax info on file. Do some research, ask other homeowners in the neighborhood. Each year, BC Assessment sends property owners a Property Assessment Notice that tells the fair market value of the property. This information is used by taxing authorities which then determine the municipal and provincial property taxes owners need to pay. The assessment takes into account building permit approvals, zoning, location, size, layout, age etc.
According to the Rental Housing Index, approximately 8,760 renters in Victoria have children. Knowing that properties surrounding schools is high on the priority list for renters with children, school quality can be an important consideration. When a potential landlord finds a property near schools, they should check the quality of those schools as it can affect the investment’s value. Although monthly income is a primary concern, schools play a part in overall property values—which is an important consideration when it’s time to sell.
No one should have to live in a high-crime area, but doing your research and understanding the neighbourhood you want to invest in is a smart move to do to make get you prepared. Public libraries and local police departments are a good source of crime statistics. Items to consider are serious crimes, petty crimes, vandalism rates and recent increases or declines in criminal activity. It’s also a good idea to discuss police presence in the neighborhood.
The Local Job Market
Places with abundant employment opportunities often attract more potential tenants. If new companies move to an area, that could mean fewer rental vacancies. However, an influx of new workers can cause real estate values to rise or fall, depending on the type of company moving in. If you’d like a company as a neighbor, chances are, a tenant would too.
Check the new neighborhood for current or future malls, parks, gyms, theaters, public transport and other perks. Cities often have promotional brochures that can give new property owners an idea of the type and extent of public amenities.
Future Development and Building Permits
Municipal planning departments have information on future development. If there are new condominiums, industrial parks or shopping centers being built, it’s a good area for growth. However, certain new developments can affect the value of surrounding properties. New housing can provide competition for prospective renters, and property investors should consider that possibility.
Rental Income is the main part of owning a rental property, and the owner should know what the area’s average rental fees are. If that amount won’t cover the mortgage, property taxes and other costs, look elsewhere. New investors should research the area enough to get an idea of where it’s headed, so they can plan their financial future.
Every town has good neighborhoods and every neighborhood has good investment property, but it takes research and patience to find the ideal combination. When you find that property, keep your expectations realistic and ensure that you have the financial wherewithal to withstand a lull in cash flow. Investing doesn’t start with the purchase; it starts with creating a financial situation where the purchase is feasible.