The idea of investing in a rental property is gaining a lot of interest across Canada. More people are realizing the potential advantages of owning rental property, including using it to grow their wealth.
In order to help you effectively weigh the pros and cons of investing in real estate, we’re counting down the top 7 benefits of purchasing a new rental property. This will allow you to understand the personal and financial benefits that typically come with buying a rental property.
1. A Lot Of Interest
In Canada, the current market is overflowing with renters; more people are looking to rent a house, condo or apartment because they have yet to save up enough money to purchase their own (thanks to hefty down payment requirements). The demand for places to rent ensures that almost every residential rental property will have plenty of people applying to be a tenant, meaning that you won’t need to search very hard for new tenants.
Similarly, the influx of renters means that landlords will have a large pool of potential tenants to choose from. Landlords can be selective with who they lease to, asking potential tenants to complete personal questionnaires, credit checks and more. The ability to be selective will help you find the perfect, reputable tenant for your place.
2. No Commitment
Although buying a rental is a big investment, a property owner is not required to own their rental forever. You always have the option to sell their property unless explicitly stated in your mortgage contract.
Whether you want to cash in on your real estate investment or simply want out of the real estate business, you can put your property up for sale.
Tip: There are many legal requirements that you must abide by when renting your property. For example, as a landlord, you are required to inform your tenant or end their lease in a legal manner. It’s best to familiarize yourself with the Ontario Landlord and Tenant Act.
3. You Don't Have To Be A Landlord
One of the most common pros and cons that investors weigh when buying rental properties is assuming the responsibilities of a landlord. The idea of having to manage properties, complete maintenance, communicate with tenants and ensure that they pay rent is unappealing to many investors. Despite this, they don’t want to miss out on the financial benefits that a rental promises.
Contrary to most people’s assumptions, you don’t need to assume the responsibilities of being a landlord. A property management company can help manage the properties that you own.
A property management company is a type of business that offers professional management services to real estate investors. Their team of professionals will handle all aspects of running your property and communicate any necessary information to you. A property management company’s services could reduce the time and energy you need to invest in your property.
4. A Diversified Portfolio
It’s always a good financial decision to diversify your portfolio. When a person invests most of their wealth in one market or investment, they risk losing it all if it performs poorly. A rental property is a purchase that provides you with a long-term investment in a unique and relatively stable market.
The Ontario housing market has been performing incredibly well in the past several years, and Royal LePage‘s market research suggests that it will continue to perform well long into 2022.
5. Increasing Property Value
6. A Passive Income
The main benefit of purchasing a rental property is that it provides you with a source of passive income. Unlike most other ways to earn income, you do not have to work hours on end to earn money from your rental. Each month you make money simply by renting your property.
Rental income can provide you with a passive source of income. As rent comes in every month, you can allocate a certain amount to paying the associated expenses of owning a property. Once you have paid the mortgage, utilities (if they are included in the cost of rent), maintenance costs, insurance, property taxes and other costs related to owning a property, any leftover money goes directly into your pocket. This is a great way to boost your monthly income or pay off any outstanding debts (e.g., credit cards, student loans, etc.)
7. GST/HST Rebates
Typically, the most underrated advantage of purchasing a new residential rental property is the tax breaks it offers; an investor could get money back when they invest in a condo or apartment to rent.
When you pay for a new property, you have to pay an additional amount equivalent to the GST/HST Rebate on top of the sales price. This additional amount is broken down into two portions: the federal portion and the provincial portion. The New Residential Rental Property Rebate can help lower the expenses of buying an investment property. In fact, eligible applicants may be able to receive up to $30,000 back from the government.
GST/HST Rebates For Rental Properties
Much like buying a house, buying an investment property can cost a lot. There is the purchase price, property taxes, land transfer taxes, insurance and more. There is also an additional amount equivalent to the GST/HST Rebate on top of the sale price of the property. These costs can quickly add up. Thankfully, the government has implemented a tax rebate to help alleviate the financial burdens of real estate investors.
Eligible real estate investors can receive up to $30,000 in payment from the New Residential Rental Property Rebate. To qualify for the New Residential Rental Property Rebate, you must have:
Get Help With Your NRRP Application
Sproule + Associates have years of experience helping real estate investors apply for their New Residential Rental Property Rebate. We’ve become incredibly familiar with the process and can help you apply for your rebate with ease. Our staff have also worked closely with the Canada Revenue Agency, ensuring that your application has the best chance of success. Contact us today to learn more.