Quizzes / Rental Properties

Quiz: Are You Ready to Buy Your First Rental Property?

Buying your first rental property is a big commitment and investment. I’m sure you’re already doing the necessary research in preparation as there are numerous articles outlining all important details involved in purchasing a rental property.  This quick quiz is meant to act as a preliminary checklist before you take the next step in the buying process and is not meant to replace advice from a professional about your specific scenario.

Rental Property Quiz

All you need to do is write down how many A’s & B’s you choose and then find out how rental ready you are below. 

1.        Do you already own a personal residence?

            A) Yes

            B) No

2.        Have you decided WHY you want to buy a rental property? Will it be a long-term investment, a short term renovation and flip, or a future property for a child?

           A) Yes

           B) No

3.        Have you talked with investors who already own one or more rental properties?

            A) Yes

            B) No

4.        Have you talked to your mortgage professional about potential financing options and what kinds of mortgage rates and payments you could likely see when you it comes to financing your rental property purchase?

A) Yes

B) No

5.        Have you thought about what kind of tenant you want to occupy the property and how you are going to find and qualify them? i.e. young professionals, students, the elderly, families with pets etc.

A) Yes

B) No

6.        Have you decided what kind of property you want to own? i.e. apartment unit,  townhome, duplex, house etc.

A) Yes

B) No

7.        Have you decided if you are going to self-manage the property or hire a property management company at a cost?

A) Yes

B) No

8.        Have you completed a cash-flow analysis spreadsheet to determine how much rent you have to charge in order to earn revenue from your rental?

A) Yes

B) No

9.        Have you decided if you’re buying a rental property on your own or under a joint venture with another person or group of people?

A) Yes

B) No

10.      Do you have liquid assets available that you have allocated to costs relating to your new rental property? i.e. if something breaks down do you have the cash to fix it right away.

A) Yes

B) No

Mostly A’s: Rental Ready

Looks like you’re ready to take the next step in buying your first rental property.  You’ve decided why you want to own a rental property, you know what kind of property you’re looking for and the kind of tenants you want to occupy it. Awesome! Since financing is now more difficult to obtain when it comes to rental properties you’re prepared for the potentially higher rates and larger downpayment requirements you may run into when getting a mortgage. Good thing you have your cash-flow analysis handy and you can play with the numbers a bit before finding your perfect revenue property strategy.

Mostly B’s:  Research Ready

Do be aware the mortgage qualifying process for buying a rental property is a bit different than when you are buying a home to owner occupy. It is not only harder to qualify for a rental property mortgage, but you now have to change your mindset to a landlord’s perspective as it’s no longer about you living in that home. Your goal is to attract a tenant to live in the property who is willing to pay a rental amount sufficient to generate a positive cash-flow at the end of each month.  Research and preparedness is what could mean the difference between a successful rental property or a property headache and before you start the purchasing process do talk to some people who are both knowledgeable and trustworthy

A’s & B’s:  In-Between Investor

You’re on your way to “eventually” purchasing your first rental but just not quite ready to begin. There may still be a couple of things that you’re undecided on; maybe you’re still experimenting with the numbers to see what suits you best or talking to some other investors about some helpful tips & tricks or trying to find the perfect joint venture partner. That’s okay as long as you’re not on a deadline. If you’re feeling pressured because the perfect property has come up but you don’t yet feel you are fully educated, perhaps it’s not the perfect property.

If you’re looking for a mortgage advice or a referral for another great real estate professional, contact The MortgageGirls at 780.433.8412 or email info@mortgagegirl.ca. Stay in the loop by following us on Twitter @mortgagegirlca.

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