This is a nice article below that summarizes some of the struggles and challenges of owning a rental property. In the frenzied Fraser Valley residential real estate market of the pandemic years, many people purchased a second investment property. Some borrowed against their principal residence to do so.
Buying, operating and maintaining a rental property is often not a simple and easy thing to do.
As noted in the piece, there are some serious issues to give thought to before deciding to buy a rental property:
- tenancy act rules, regulations and laws (i.e. tenant rights)
- what is the impact on you if a tenant falls behind on their rent? Can you make your mortgage payment and meet other costs (i.e. property taxes, insurance, utilities etc.) tied to the rental property, if your tenant stops paying you?
- what would you do if your tenant outright refuses or is unable to pay the rent and refuses to leave your property?
- what measures are you taking to properly screen prospective tenants?
- do you have a contingency fund to pay for inevitable emergency repair bills? Or for routine maintenance items?
- do you have the time and energy to attend to maintenance and repairs on your own?
- is the rental property offering you a monthly positive cash flow? OR, are you simply counting on capital appreciation year after year?
- if you are looking at hiring a property manager, does that still make your investment financially feasible from a monthly cash flow perspective?
These are but a few key questions to consider before deciding to venture into the world of residential rental properties. There can be unimaginable emotional stress and financial hardship due to a bad tenant or unexpected repairs. This is not to say that rental property never makes sense or isn't a good investment. It's just a reminder that there are a LOT of factors to consider, before you take the plunge into something like this.
Owning and operating a rental property is NOT always easy money, as it may seem. And some have wrongly come to believe in easy money through rental property during the recent boom years in the real estate market, here in Metro Vancouver and the Fraser Valley. Like all investments, there are potential risks and rewards to objectively think about. This is especially important when the stakes are so high in expensive real estate markets like ours.