Pre-Qualified, Pre-Approved Mortages Ottawa, Ontario

High returns in rental properties.

According to economists, the Canadian economy is set to continue experiencing a modest growth in 2015. Further predictions were made on the year, citing it as a sellers’ market year. With all these positive predictions and speculations, the desire for and trend of rental property owning all over Canada has grown.

Taking Ottawa as a case study, the commercial property market performance has been projected to experience steady high gains. This can be in some way attributed to the strong public sector presence that gives investors in the housing market a justification for investment. A further fueling factor is the demand that has continued with time to surpass the supply of properties for rent. The high demand has ensured that property values will hold. With the high demand and less supply, naturally rents will continue going up, bringing in more returns for investors. Such scenarios have gained the attention of many Canadians and with the ease of access to low cost debt and equity capital, many have taken steps to own a rental home.

Other factors that can’t be overlooked include the GDP forecasted growth. A growth in GDP, directly translates to firm retail consumption and a steady job growth trend. The ultimate result of this is the growth and prospering of the retail sector giving a positive plus boost to rental housing owners.

Factoring in all the above points, we get to see that the rental property markets are giving owners and investors solid returns. Meanwhile, property for rent owners will continue cashing in huge as all the fueling factors for their high returns are here with us to stay.





At Capital Mortgages in Ottawa we strive to be your personal mortgage broker for life.

Questions to ask before buying a rental property

Owning a rental property can be a profitable investment — but it’s not for everyone. Here are some questions to ask yourself before you take the plunge.

If you’re thinking of purchasing an investment property to rent out to tenants, you will need to do some serious research. There’s much more to being a landlord than putting up an ad on Craigslist — it’s like taking on a second job. You will need to factor in realistic financial projections, and carefully weigh the pros and cons of your decision.

Here are a few things to consider before purchasing a rental property.

1. Do you have enough saved for the down payment?
Under Canada’s new mortgage rules, you must come up with a down payment of at least 20 per cent for a small rental property holding from one to four units. This rule does not apply to borrowers whose principal residence also includes rental units.

2. How much income will the property generate?

You will need to do some research into the neighbourhood. What does rent typically cost, and what is the vacancy rate in that area? Don’t assume that you will always have a tenant — according to the Canada Mortgage and Housing Corporation (CMHC), the average vacancy rate in Canada’s 35 major centres is 2.5 per cent. To be safe, assume a four or five per cent vacancy rate into your financial projections, and don’t forget to calculate potential costs, such as repairs and maintenance.

3. Can you be a successful landlord?

Being a landlord is a second job. It’s not just about finding a tenant and letting the money come in every month. Not only do you have to be available to field emergency calls and keep up with maintenance such as routine fixes, yard work and even shovelling snow, but if you rent to the wrong tenant, you might have even bigger problems to deal with, such as non-payment of rent. Hiring a property manager can help, but that will greatly reduce your monthly profit from the property — and you never want to be in a negative cash-flow situation.

4. How will deductions affect your profits?

By deducting certain expenses from your income, you can reduce the taxes that you owe. Applicable expenses include mortgage interest, property tax, insurance, property management, maintenance and utility bills. You can also deduct any losses from your rental property. If your expenses exceed your rental income, you can subtract your losses from any other source of income you have coming in.

Purchasing a rental property can be a great way to diversify your investment portfolio, but it is a big commitment. Being a landlord is time-consuming, and not for people who are interested in an easy, passive income stream.

Want to learn more? Check out the Canada Revenue Agency’s Rental Income Guide, where you can get more information on deductible expenses, and most other issues regarding rental property.