Tag Archives: real estate

The Best Cities To Own Rental Property In Florida

 

Credit: Getty Royalty Free | Miami Beach. Florida. USA. The Miami metro area is a hotbed for investment property investing.

Florida is an intriguing state when it comes to buying and owning rental property. On one hand, demand for homes — especially single-family homes — has been consistently on the rise in Florida. Yet despite the demand, it doesn’t necessarily convert to more homebuyers. Instead, even though Florida boasts fairly low housing prices statewide, many people are still opting to rent instead of buy. As a result, rental rates are skyrocketing.

Now add into the mix low property taxes and insurance, as well as no state income tax. Great climate and top-of-the-line healthcare are bonuses that help make Florida one of, if not the best, states for America’s retiring Baby Boomer masses.

Here’s a look at the best places in Florida to own rental property and turn a solid profit.

Tampa

Although Tampa home prices have risen in recent years, the city still has plenty of neighborhoods and zip codes where investors can find properties at affordable prices, and rent them out for $1,405 to $1,527 a month on average.

Tampa’s economic prospects really boost the city’s appeal to rental property owners. Tampa’s year-over-year employment growth beat the U.S. average. According to Bureau of Labor Statistics data, U.S. nonfarm employment increased approximately 1.6% from 2017 to 2018, while Tampa managed a 2.3% increase.

Healthcare and social assistance is the dominant employment sector in Tampa. This isn’t a bad thing considering jobs such as home health aides, personal care aides, physician assistants and nurse practitioners all rank among the top-10 fastest growing occupations in the country, according to BLS Employment Projections.

Here’s a breakdown of some important figures to consider before buying property in Tampa:

  • Median list price – All Homes: $312,995
  • Median list price – Condo: $239,900
  • Rent list price: $1,527
  • Median rent: $1,405
  • 1-year job growth rate: 2.3%
  • 5-year population growth: 12%
  • Average 30-year fixed mortgage rate: 4.40%
  • Rental yieldSee rental yields for Tampa

The trajectory of Tampa’s population growth is very conducive to potential future property owners. Since 2013, Tampa’s population has risen by an impressive 12%, one of the highest rates in the country. With a local economy worth well over $130 billion, Tampa is easily one of Florida’s best markets to buy and own rental property. For a more in-depth look, or just to explore, take a look at this interactive map of the Tampa real estate market.

Jacksonville

Robust job and population growth as well as great affordability greet prospective investment property owners in Jacksonville. Florida’s largest city is also home to a first-rate healthcare system, and burgeoning biological sciences sector. The population in Jacksonville has grown about 8% from 2013 to 2018, and 24% since the year 2000. Plus, the median home price is $210,000 in Jacksonville, which is 33% cheaper than the national average, $278,900.

Jacksonville’s average rental yield is among the highest in the U.S. Rent growth is also healthy. The city’s 2.6% increase is better than the national year-over-year average of 0.5%. Specific markets within the Jacksonville metro area, such as Butler Beach, are displaying rent growth rates in excess of 10%.

Here’s a breakdown of some important figures to note before buying property in Jacksonville:

  • Median list price – All Homes: $210,000
  • Median list price – Condo: $134,950
  • Rent list price: $1,250
  • Median rent: $1,345
  • 1-year job growth rate: 3.2%
  • 5-year population growth: 8%
  • Average 30-year fixed mortgage rate: 4.40%
  • Rental yieldSee rental yields for Jacksonville

The reasons for all this growth and development are manifold. Jacksonville’s cost of living is below the national average. And to this is we can add the usual Florida amenities, like warm weather, conducive business climate and no state income tax.

See interactive map of Jacksonville real estate market >>

Orlando

In terms of both employment and population growth, Orlando really outshines. From summer 2017 to 2018, employment increased 4.3%, which is almost three times the U.S. average growth rate. Its population surged by 14% from 2013 to 2018.

The most common employment sectors for those who live in Orlando are accommodation and food service (12.3%), which includes workers of Orlando’s world-class resorts like Disney World and Universal Studios Orlando. Second most common sector is healthcare and social assistance (11.9%), followed by retail trade (11%).

Here’s a breakdown of some important figures to consider before you buy property in Orlando. Also, here’s an interactive map of Orlando’s real estate market to help out.

  • Median list price – All Homes: $285,000
  • Median list price – Condo:$140,000
  • Rent list price: $1,600
  • Median rent: $1,478
  • 1-year jogrowth rate: 4.3%
  • 5-year population growth: 14%
  • Average 30-year fixed mortgage rate: 4.40%
  • Rental yieldSee rental yields for Orlando

Rents grew 2.3% in the last year, which is well ahead of the U.S. overall growth rate. Rent yield in Orlando is markedly higher than in most other cities. Comparatively low home prices combine with relatively higher rent prices to create a city that is especially suitable to owning rental property.

Source: Forbes –
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Rent-to-Own Homes: How the Process Works

If you’re like most home buyers, you’ll need a mortgage to finance the purchase of a new house. To qualify, you must have a good credit score and cash for a down payment. Without these, the traditional route to homeownership may not be an option.



There is an alternative, however: a rent-to-own agreement, in which you rent a home for a certain amount of time, with the option to buy it before the lease expires. Rent-to-own agreements consist of two parts: a standard lease agreement and an option to buy. Here’s a rundown of what to watch for and how the rent-to-own process works. It’s more complicated than renting and you’ll need to take extra precautions to protect your interests. Doing so will help you figure out whether the deal is a good choice if you’re looking to buy a home.

You Need to Pay Option Money

In a rent-to-own agreement, you (as the buyer) pay the seller a one-time, usually nonrefundable, upfront fee called the option fee, option money or option consideration. This fee is what gives you the option to buy the house by some date in the future. The option fee is often negotiable, as there’s no standard rate. Still, the fee typically ranges between 2.5% and 7% of the purchase price. In some contracts all or some of the option money can be applied to the eventual purchase price at closing.

Read the Contract Carefully: Lease Option vs. Lease Purchase

It’s important to note that there are different types of rent-to-own contracts, with some being more consumer friendly and flexible than others. Lease-option contracts give you the right – but not the obligation – to buy the home when the lease expires. If you decide not to buy the property at the end of the lease, the option simply expires, and you can walk away without any obligation to continue paying rent or to buy.

Watch out for lease-purchase contracts. With these you could be legally obligated to buy the home at the end of the lease – whether you can afford to or not. To have the option to buy without the obligation, it needs to be a lease-option contract. Because legalese can be challenging to decipher, it’s always a good idea to review the contract with a qualified real estate attorney before signing anything, so you know your rights and exactly what you’re getting into.

Specify the Purchase Price

Rent-to-own agreements should specify when and how the home’s purchase price is determined. In some cases you and the seller will agree on a purchase price when the contract is signed – often at a higher price than the current market value. In other situations the price is determined when the lease expires, based on the property’s then-current market value. Many buyers prefer to “lock in” the purchase price, especially in markets where home prices are trending up.

Know What Your Rent Buys

You’ll pay rent throughout the lease term. The question is whether a portion of each payment is applied to the eventual purchase price. As an example, if you pay $1,200 in rent each month for three years, and 25% of that is credited toward the purchase, you’ll earn a $10,800 rent credit ($1,200 x 0.25 = $300; $300 x 36 months = $10,800). Typically, the rent is slightly higher than the going rate for the area, to make up for the rent credit you receive.But be sure you know what you’re getting for paying that premium.

Maintenance: It May Not Be Like Renting

Depending on the terms of the contract, you may be responsible for maintaining the property and paying for repairs. Usually, this is the landlord’s responsibility so read the fine print of your contract carefully.  Because sellers are ultimately responsible for any homeowner association fees, taxes and insurance (it’s still their house, after all), they typically choose to cover these costs. Either way you’ll need a renter’s insurance policy to cover losses to personal property and provide liability coverage if someone is injured while in the home or if you accidentally injure someone.

Be sure that maintenance and repair requirements are clearly stated in the contract (ask your attorney to explain your responsibilities). Maintaining the property – e.g., mowing the lawn, raking the leaves and cleaning out the gutters – is very different from replacing a damaged roof or bringing the electric up to code. Whether you’ll be responsible for everything or just mowing the lawn, have the home inspected, order an appraisal and make sure the property taxes are up to date before signing anything.

Buying the Property

What happens when the contract ends depends partly on which type of agreement you signed. If you have a lease-option contract and want to buy the property, you’ll probably need to obtain a mortgage (or other financing) in order to pay the seller in full. Conversely, if you decide not to buy the house – or are unable to secure financing by the end of the lease term – the option expires and you move out of the home, just as if you were renting any other property. You’ll likely forfeit any money paid up to that point, including the option money and any rent credit earned, but you won’t be under any obligation to continue renting or to buy the home.

If you have a lease-purchase contract, you may be legally obligated to buy the property when the lease expires. This can be problematic for many reasons, especially if you aren’t able to secure a mortgage. Lease-option contracts are almost always preferable to lease-purchase contracts because they offer more flexibility and you don’t risk getting sued if you are unwilling or unable to buy the home when the lease expires.

Who’s an Ideal Candidate for Rent-to-Own

A rent-to-own agreement can be an excellent option if you’re an aspiring homeowner but aren’t quite ready, financially speaking. These agreements give you the chance to get your finances in order, improve your credit score and save money for a down payment while “locking in” the house you’d like to own. If the option money and/or a percentage of the rent goes toward the purchase price – which they often do – you also get to build some equity.

While rent-to-own agreements have traditionally been geared toward people who can’t qualify for conforming loans, there’s a second group of candidates who have been largely overlooked by the rent-to-own industry: people who can’t get mortgages in pricey, nonconforming loan markets. “In high-cost urban real estate markets, where jumbo [nonconforming] loans are the standard, there is a large demand for a better solution for financially viable, credit-worthy people who can’t get or don’t want a mortgage yet,” says Marjorie Scholtz, founder and CEO of Verbhouse, a San Francisco–based start-up that’s redefining the rent-to-own market.

“As home prices rise and more and more cities are priced out of conforming loan limits and pushed into jumbo loans, the problem shifts from consumers to the home finance industry,” says Scholtz. With strict automatic underwriting guidelines and 20% to 40% down-payment requirements, even financially capable people can have trouble obtaining financing in these markets.

“Anything unusual – in income, for example – tosses good income earners into an ‘outlier’ status because underwriters can’t fit them neatly into a box,” says Scholtz. This includes people who have nontraditional incomes, are self-employed or contract workers, or have unestablished U.S. credit (e.g., foreign nationals) –  and those who simply lack the huge 20% to 40% down payment banks require for nonconforming loans.

High-cost markets are not the obvious place you’ll find rent-to-own properties, which is what makes Verbhouse unusual. But all potential rent-to-own home buyers would benefit from trying to write its consumer-centric features into rent-to-own contracts: The option fee and a portion of each rent payment buy down the purchase price dollar-for-dollar, the rent and purchase price are locked in for up to five years, and participants can build equity and capture market appreciation, even if they decide not to buy. According to Scholtz, participants can “cash out” at the fair market value: Verbhouse sells the home and the participant keeps the market appreciation plus any equity they’ve accumulated through rent “buy-down” payments.

Do Your Homework

Even though you’ll rent before you buy, it’s a good idea to exercise the same due diligence as if you were buying the home outright. If you are considering a rent-to-own property, be sure to:

  • Choose the right terms. Enter a lease-option agreement rather than a lease-purchase agreement.
  • Get help. Hire a qualified real estate attorney to explain the contract and help you understand your rights and obligations. You may want to negotiate some points before signing or avoid the deal if it’s not favorable enough to you.
  • Research the contract. Make sure you understand:
    • the deadlines (what is due when)
    • the option fee and rent payments – and how much of each applies towards the purchase price
    • how the purchase price is determined
    • how to exercise your option to buy (for example, the seller may require you to provide advance notice in writing of your intent to buy)
    • whether pets are allowed
    • who is responsible for maintenance, homeowner association dues, property taxes and the like.
  • Research the home. Order an independent appraisal, obtain a property inspection, make sure the property taxes are up to date and ensure there are no liens on the property.
  • Research the seller. Check the seller’s credit report to look for signs of financial trouble and obtain a title report to see how long the seller has owned it – the longer they’ve owned it and the more equity, the better.
  • Double check. Under which conditions would you lose your option to buy the property? Under some contracts, you lose this right if you are late on just one rent payment or if you fail to notify the seller in writing of your intent to buy.

The Bottom Line

A rent-to-own agreement allows would-be home buyers to move into a house right away, with several years to work on improving their credit scores and/or saving for a down payment before trying to get a mortgage. Of course, certain terms and conditions must be met, in accordance with the rent-to-own agreement. Even if a real estate agent assists with the process, it’s essential to consult a qualified real estate attorney who can clarify the contract and your rights before you sign anything.

Source: Investopedia – Jean Folger Nov. 6, 2018

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Can you walk away from your home?

The fluctuating housing market can make purchasing a house a bit of a gamble. If you buy when prices are high and the value of your home goes down, most homeowners can just wait it out. Houses are long-term investments and eventually with time you know the market will rise again.

“If you bought at the market high and prices drop, you could be underwater on paper, which means you owe more than the home is worth. If you’re not planning to sell and you can meet your payments, you don’t lose,” says Scott Terrio, manager of consumer insolvency for debt relief experts Hoyes, Michalos & Associates. “It becomes a problem for someone who discovers they can’t carry the mortgage payment plus all their other debt, especially if they’ve lost a job, dealt with an illness or they’ve simply run out of credit.” In those instances, it may make fiscal sense for the homeowner to abandon their mortgage and walk away. The home goes into foreclosure — the home is turned over to the lender, who attempts to recover their investment by forcing the sale of the home and using the money to pay off most of the debt.

If you have lots of debt and you’re not meeting your payments, can you simply choose to pack up your belongings and walk away from your high-priced mortgage?
If you have lots of debt and you’re not meeting your payments, can you simply choose to pack up your belongings and walk away from your high-priced mortgage?  (CONTRIBUTED)

This happened frequently in the U.S. during the financial crash in 2008; lenders were forced to absorb the unrecovered debt. Could this happen in Canada? It’s not quite as simple here. “In Ontario and most other provinces, there are full recourse rules, which means you can’t walk away from your mortgage obligation without recourse from the lender, who can pursue mortgage shortfalls in court,” explains Terrio. However, homeowners can file a proposal or bankruptcy, which makes any shortfall unsecured (like other debt such as student loans, payday loans, car loans, line of credit and credit card debt). “Once a proposal or bankruptcy is filed, you can’t be sued for any shortfall, which is the difference between what you owe and what the lender can get for the house.”

What is the difference between filing a proposal and filing for bankruptcy? They’re both solutions to resolve debt and provide legal protection from creditors (for example, creditors stop wage garnishments). In bankruptcy, you surrender certain assets in exchange to discharge debt. When you file a proposal, you make an offer to settle debt for less than you owe.

“Proposals are filed more frequently with our clients now than bankruptcy,” explains Terrio. While you have to make a better offer to your creditor than what they would get if you filed bankruptcy, “it has less impact on your credit long-term and you can keep your belongings, which makes it a very realistic and favourable option for many.”

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Here’s how much money you have to make a year to afford an ‘average’ home in the hottest US cities

Business district area of downtown San Jose, California.

Mark Miller Photos | Getty Images
Business district area of downtown San Jose, California.

The median U.S. household now earns about $61,372 a year, up nearly 2 percent from 2016. Still, in order to afford to buy a home in one of the country’s hottest and most expensive cities, like San Jose, California, you’d need to make more than four times that amount.

That’s according to financial website How Much, which crunched numbers from the National Association of Realtors and mortgage-information website HSH.com to determine where it’s most expensive to buy an “average-sized home.”

Researchers found the median price of homes in the 50 most populated metro areas across the country and “calculated monthly principal, interest, property tax and insurance payments buyers have to pay for a 30-year fixed rate mortgage,” says How Much.

They then calculated what salary would be needed to afford each home, assuming a 20 percent down payment and that the total housing payment would not make up more than 28 percent of gross income.

How Much: Annual income needed to buy a home

Based on the data, here are the top 10 cities where you to earn the most money to buy a typical home:

1. San Jose, California

Annual income needed to afford a home: $274,623

2. San Francisco, California

Annual income needed to afford a home: $213,727

3. San Diego, California

Annual income needed to afford a home: $130,986

4. Los Angeles, California

Annual income needed to afford a home: $114,908

5. Boston, Massachusetts

Annual income needed to afford a home: $109,411

6. Seattle, Washington

Annual income needed to afford a home: $109,275

7. New York, New York

Annual income needed to afford a home: $103,235

8. Washington, D.C.

Annual income needed to afford a home: $96,144

9. Denver, Colorado

Annual income needed to afford a home: $93,263

10. Portland, Oregon

Annual income needed to afford a home: $85,369

“Median household income across the United States recently reached a record high, which is great news for workers,” says How Much. “The bad news is that isn’t enough to afford a typical home in 25 out of the 50 cities on our map.” That’s especially true on the West Coast.

“Our map reveals three tiers in annual income workers need to earn to afford a median home. First, the West Coast stands out as by far the most expensive market in the country,” the report says, “with four out of the top four markets in California alone.”

In Los Angeles, San Diego, San Francisco and San Jose, California, median homes range in value from $618,000 to more than $1.3 million, according to real-estate site Zillow. The U.S. national median home value, by comparison, is just above $216,000.

“Median household income across the United States recently reached a record high, which is great news for workers. The bad news is that isn’t enough to afford a typical home in 25 out of the 50 cities on our map.”-HowMuch.net

“The second tier of expensive locales is along the East Coast,” How Much reports, “led by the familiar hot spots of unaffordable housing like Boston, New York and Washington, D.C.

In Portland and Denver, meanwhile, homes aren’t as expensive as they are in California or New York, but workers would still need to make about $85,000 a year to afford to buy.

Some lower-profile American cities do still offer professional opportunities and good deals. In these three up-and-coming metro areas, for example, jobs are plentiful yet housing is affordable.

No matter where you fall on the map, though, living within your means and employing common-sense budgeting tactics can help you save in the long run. If you’re looking to buy a home, be sure you’re ready to transition from renting and if you’re going to continue to rent, check out these savings hacks and other ways to make your money stretch further.

 

Source: CNBC.com –  

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Most landlords plan to ban cannabis use in rental units: Survey

marijuana

Ahead of legalization, most property owners believe cannabis use will decrease the value of their residential assets

marijuana
The majority of landlords polled in a new survey have responded negatively to cannabis use in rental units, going so far as to offer lower rent to tenants who agree to not smoking in units.
The survey conducted by real estate website Zoocasa was conducting in anticipation of cannabis legalization, coming into effect across Canada tomorrow (October 17).
A whopping 88 per cent of landlords say they plan to prohibit smoking in their buildings, with 65 per cent willing to consider lowering rent for tenants who don’t smoke cannabis inside their suites. Sixty-four per cent of Canadians agree that building management or strata councils should have the right to ban cannabis use.
weed
Tenants seem to be on the same page – with only 35 per cent of respondents who identify as renters affirming their right to smoke cannabis inside their homes.
Stigma towards cannabis use remains high among homeowners and buyers, despite impending legalization; sixty-four per cent of property owners still believe smoking inside of homes with decrease the property’s value. Fifty-seven percent believe growing cannabis inside a home for personal use would decrease its resale value. Prospective buyers agree, with 52 per cent saying they’d be less likely to purchase a home if they knew marijuana had been cultivated there.
Cannabis retailers are also seen as less-than-desirable neighbors, with only 31 per cent of Canadians comfortable living near one. Fifty per cent of Generation Xers (those born between 1961 and 1981) believe a dispensary in the neighbourhood would devalue their home.
weed
Zoocasa conducted the online survey of more than 1,300 Canadians from Sept. 27 to Oct. 3.
Source: Western Investor- Tanya Commisso October 16, 2018
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Here’s What’s Happening With the Massive Britannia Farm Redevelopment Plan in Mississauga

For years, no one quite knew what would become of the 200-acre historical agricultural property known as the Britannia Farm.

Now, it looks like plans to transform the property are closer to becoming reality.

City of Mississauga council approved changing the zoning of a 32 acre parcel of land located on Britannia Farm from institutional to mixed use. That means that the city and the Peel District School Board (which owns the farm) are now free to transform the parcel of land located on the northwest corner of Hurontario Street and Bristol and move forward with a proposal to have the land include a variety of housing types, including affordable housing.

https://www.facebook.com/plugins/video.php?href=https%3A%2F%2Fwww.facebook.com%2Finsauga%2Fvideos%2F1945506232186085%2F&show_text=0&width=476The opportunity will now allow the PDSB to either look at selling or leasing the parcel for funding.

The entirety of the Britannia Farm is currently zoned as institutional, with the exception of the Cooksville Creek.

This specific parcel on the Farm has been the subject of discussions for a number of years, as approval has been necessary for a variety of components to prepare the lands. Back in 2010, the Heritage Advisory Committee needed to give the PDSB approval to move three heritage properties from the 32 acre parcel to another area of the farm.

The historic properties on the site include the red brick Britannia Schoolhouse (c. 1870), Britannia Farmhouse (c. 1860 and 1870), two-storey Gardney-Dunton House (c. 1830) and Conniver Barn (c. 1880).

The purpose of moving the heritage buildings is to clear land in order to develop housing, as well as to move the properties to a section of the farm that will be used for educational purposes. The historical portion will also include an improved Farm lane, a historic corridor that links the various zones together and connects the Farm to Hurontario Street.

However, a report at the Heritage Advisory Committee on April 10 showcased images that suggested the heritage buildings could remain where they are. In these images, buildings were simply built around the heritage properties. Councillor Carolyn Parrish expressed displeasure with the idea of building around heritage buildings and said that it would be something that could be devastating to the significance of the properties.

Most community members who attended a public meeting back in October 2017 did approve of the idea of moving the heritage properties to another place on the farm. Parrish says that, at this point in time, approximately 99 per cent of the individuals within the community are convinced that this is a good project.

As for what will happen going forward, the PDSB will look at either selling the land to a developer or leasing the lands for continuous revenue streams. Once this happens, the city will receive studies and agreements for review. New housing is a possibility, as these may include a draft plan for subdivisions and/or condos and a site plan.

There will be other reports regarding stormwater management, a feasibility study and an environmental assessment among other documentation.

Phylis Hampshire, a resident that came forward during question period, asked if the citizens of Mississauga can somehow be assured that this will be the only proposed development on the land.

It’s a very special piece of land in the middle of Mississauga, it would be nice if it could stay open,” says Hampshire.

We adopted [the land] as a future outdoor education centre. The current Peel Board Chair has done everything in her power to keep that land the way it was intended by King William the Fourth, which was for the benefit of the children of Peel,” says Parrish. “As far as selling any more pieces of land off, it’s not going to happen. This piece at the front is just so they can finance 168 acres of outdoor education centre.”

Historical properties on the farm

The development of these lands is important, as they’re located near the future Hurontario LRT stop and the soon-to-be-reinvigorated Hurontario Street corridor. For that reason, the city says the parcel must be developed with attention to its surroundings. In short, it’s an attractive yet sensitive project. Since the parcel surrounds 170 acres of historic and cultural landscape and the connection to downtown, the development should include a number of criteria discussed in the Master Plan.

The Master Plan recommends student-focused environmental and agricultural programs, the establishment of landscape zones, a development parcel that will be 32 acres in size and phased public access in partnership with the city of Mississauga.

It is recommended that the proposed development include open spaces, parks, trees, and “a place to foster community.” For example, it is recommended that parking for any of the proposed developments be primarily underground and out of view from the public realm.

One issue that came to light was a part of the report that included development of a road within the park. Parrish cautioned staff at the city, saying “an area of caution I would give to [city staff], is when you talk about the potential opportunities for future road construction, it better not be on the 168 acres [of outdoor educational space].”

Since the Britannia Farm has just received approval for the mixed use zoning, the city has taken the first step in what could be a long process. In the future, there will be more discussion on the planning of the site with developers and potential for sale of the land.

It will be interesting to see what unfolds next.

It’s a very proud day for me,” says Parrish who been on this project since she was a trustee on the school board with Councillor George Carlson.

Janet McDougall, chair of the public board, was acknowledged at the meeting for her significant contribution to the project over the years, and with McDougall retiring this year, it will be a legacy project for her as she enters retirement.

Janet I want to congratulate you myself for all your years of service, thank you, and also for protecting this jewel that our residents are very protective of as well. It’s a piece of land that people don’t want to see altered in any way, you’ve respected that and we thank you for your plans,” says Mayor Bonnie Crombie.

Editor’s Note: A previous version of this story misidentified Janet McDougall as Janice Baker, Mississauga’s city manager. We regret the error.

Source: Insauga – by Melissa Stolarz on April 22, 2018

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5 Things I Learned in My First Year Owning a Rental Property

I was determined to own property, in some form. Sadly, I couldn’t afford anything in my home city of Toronto, so I decided to buy a property in a neighbouring city and rent it out until, or if, I was ready to move.

After looking at several possibilities, I decided to buy in Hamilton because of transit options, affordable housing prices and a low vacancy rate.

I found a cute bungalow divided in two units. After all the paperwork went through, I found great tenants.

It’s now one year later, and I’ve learned a lot. Here are five lessons I learned:

  1. Plan for Extra Costs

I needed way more money than I thought in order to buy and manage a rental property. The closing costs alone were thousands of dollars in cash. In Ontario, closing costs include land transfer tax, legal fees, a home inspection, pre-paid property tax and PST on Canada Mortgage and Housing Corporation insurance — if you put less than 20 per cent down. My closing costs totalled $6,000.

In the first year, I spent $2,700 on maintenance, and that’s for a small, fully-renovated house. Just recently, a windstorm knocked shingles off my roof. Totally unexpected and $500 to fix.

Budget for all anticipated expenses, and then add a few thousand dollars to be safe.

  1. Figure Out the Rent

How do you know if you have enough money to be a landlord? Easy: use a spreadsheet. You need to know exactly how much your house costs to run so that you can charge sufficient rent.

And how embarrassing would it be if you forgot whether a tenant paid you first and last months’ rent? Think of an investment property like a business, and keep your books accordingly.

  1. Don’t Forget Tax Time

I was shocked when I had to pay $1,500 this April to the Canada Revenue Agency (CRA). The CRA taxes rental income at your marginal tax rate. I now have an automated monthly savings set up to set aside tax money and avoid last-minute scrambling.

  1. Check Your Tenant’s Credit Worthiness

What you need as a landlord is a tenant who pays their rent promptly each month. A credit score can tell you if a person has a history of paying their lenders on time. Ask for a credit report and employment letter to confirm that your tenant can pay their rent each month.

  1. To Include Utilities or Not?

I decided to include utilities. I have two units but one meter, and I couldn’t figure out a way for each tenant to split it fairly without hassle. So I called the utility companies, asked them for the monthly average of the previous year, added 30 per cent, and included it in the rent.

You can also let the tenants pay utilities themselves. Because electric and gas are so expensive in Ontario, you don’t want to be on the hook unless you have to be. It’s a lot easier for tenants to leave the lights on when someone else is footing the bill.

A Learning Experience

I learned that owning an investment property is much like having a child. Make sure you can comfortably afford it before you start trying, and if it’s exhausting you, consider hiring a nanny—that is, a property management company.

 

Source: Tangerine.ca – Written by Danielle Kubes Wednesday, July 11th, 2018

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