Rental Property Investing – Due Diligence on Yourself
Investing in rental properties can be a lucrative way to create wealth, by not only providing an income stream, but also by creating an opportunity for capital growth – AKA — an increase in the property’s value during your period of ownership. Types of properties can include – residential (single unit & multi-family), retail/commercial buildings (single unit & strip centres), office buildings (single unit & multi-complex), mixed use (ground floor commercial & above ground residential), industrial buildings (single unit & multi tenant complexes), and even raw land that generates some level of income.
After assessing the various property categories, determine the type that best fits with your objectives and will best meet your criteria. It isn’t one-size-fits-all in considering rental property investments and you need to do some necessary due diligence on yourself before moving forward – due diligence on the properties/market will follow later. Markets throughout Canada are littered with investment property ventures ‘gone bad’ and the best advice here is to ‘walk before you run’.
Some key questions to ask yourself:
- Am I more interested in residential or commercial/industrial properties?
- What locations/neighbourhoods are of interest?
- Am I hands on, or will I require a property manager?
- What are my cash flow/return on investment objectives?
- What type of financing is required and what % downpayment can I put up?
- What sort of financial implications can I expect due to vacancies?
- What sort of maintenance & capital improvement costs am I willing to accept?
- Will I incorporate? How can I best limit any liability?
- What sort of market am I comfortable buying in?
- Is liquidity an issue if I need to sell (quickly)?