Investment properties are a hot topic in Canada right now. Reportedly, nearly one third of properties in major Canadian markets are held by investors (Bloomberg, April 2022). This boom in investing in real estate is also one of the factors driving up interest rates, which we’re all keeping an eye on.
At One80 Law Group, we’re finding more and more clients asking us about buying investment properties and there are different factors which need to be considered. We’ve included the major ones below.
1. If to plan to rent out your investment property, know your rights and obligations as a landlord
Being a landlord isn’t simply a matter of owning a property and collecting rent. There’s more to it, and it’s important to be fully aware of what your obligations as a landlord are.
Legislation affecting landlords is different between Alberta and British Columbia so please arrange a consultation with us so that we can discuss these with you.
Generally, some things you will need to manage include:
- A signed agreement with your tenant called a Residential Tenancy Agreement. This sets out the dates, payments, and the rights and obligations of both parties.
- What you can and cannot do with a tenant’s damage deposit.
- Making sure the premises are fit to live in, for example, controlling any pests or bugs, and that the utilities and appliances are in good working order.
- The tenant’s right to “peaceful enjoyment” which allows them to relax and enjoy their home, without you dropping in unannounced.
Specific to Alberta:
- You’re required to give the tenant “notice of landlord” so they have your name and contact details.
- If you want to hire a property manager, they must be licensed by the Real Estate Council of Alberta.
Specific to British Columbia:
- Be aware of whether the tenancy will be covered under the Residential Tenancy Act or the Manufactured Home Park Tenancy Act. One80 Law can help you understand which applies.
- Your rental unit must meet all local bylaws and regulations, as well as building and maintenance standards.
2. Consider the short term and long term implications
Buying an investment property can be a great financial decision, but you need to consider a whole range of future scenarios. For example, if interest rates rise, can you still afford the mortgage? If the property is vacant, can you afford the mortgage, utilities, insurance and property taxes?
You’ll also need to factor in the long term upkeep and maintenance of the property to keep it in habitable condition.
While you own a rental property, there are several tax benefits that you will be able to claim for. Likewise, if you choose to sell your investment property, you will have to consider any capital gains or losses implications.
3. Understand what kind of mortgage you’re eligible for
There are different classes of mortgage available for landlords. Speaking with your mortgage broker or bank will be a good way of understanding the difference from your principal place of residence mortgage.
4. Buy somewhere you’re familiar with
This won’t be the case for every investor, but can be a good piece of advice. Knowing the area that you’re going to invest in can help avoid issues such as unexpected crime rates, or flooding and erosion in an area that you were unaware of.
Consider the possibility of the future and whether you’d be able to live in the investment property if you needed to. Is it an area that you’d want to live in?
The liveability of where you buy will also be a factor in ensuring that the property is always rented.
5. Consider challenges and benefits of buying out of province
Often clients are interested in buying in a different province, whether to vacation in or use as an income property. Where this is the case, you need to understand the different laws that apply. We’ve written a guide to buying real estate in Alberta when you’re out of province which you might find useful.
If you have any other questions you’d like answered about buying property in Alberta or British Columbia as an investment, please contact our real estate law team as we are happy to help.