Four Questions to Ask Before Buying a Home with Income Potential

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The idea of ​​mortgage assistance may be appealing, but there are many things to think about before investing.

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Homes in Montreal aren’t as affordable as they used to be. One option to consider is choosing a home with mortgage assistance, such as a small plex or a home with a basement, to provide additional income that can offset housing expenses or pay off your mortgage sooner.

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On real estate listing websites like Realtor.ca, Centris.ca or DuProprio.com, buyers can easily filter the search to show only income properties. Recently, 10 plexes on the island of Montreal were listed on Centris.ca for less than $450,000 in places like Montreal East, Montreal North, Lachine, Pointe-aux-Trembles, Mercier and even Ville-Marie. At this price, the annual potential gross income ranges from $20,000 to $30,000. Venture off-island and a plex can be had for as little as $260,000 in Vaudreuil-Soulanges or the South Shore, including some with similar earning potential.

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The idea of ​​mortgage assistance may be appealing, but there are many things to think about before investing.

What are your goals?

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Just because you buy a plex doesn’t mean you’re going to make a profit. How much profit depends on your needs and goals. If you plan to live in a suite and rent another part of the property, for example, it may not matter that the rental covers all your real estate expenses – some is better than none. On the other hand, if you plan to rent all the units, now or in the future, you will want to make sure that the rent collected is high enough to pay the costs of owning the property.

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How profitable is the rental unit, really?

You may know the potential gross income of a property, but how much are the expenses? In addition to mortgage and taxes, don’t forget to factor in utilities, maintenance and insurance.

You’ll also want to put some money aside each month as a rainy day fund in case the rent is overdue or the apartment becomes vacant between tenants. Many older plexes in Montreal are in poor condition. Also factor in the cost of upgrades and upkeep to keep the units in good condition.

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Have you done your due diligence?

If the rental unit is rented, have you checked that the rent has been paid regularly and on time? How does the rent compare to other properties in the area? If your plan is to increase the rent, remember that there are strict rules about when and how it can be increased. If the house you are buying has a separate basement suite that you intend to rent out, have you confirmed that the suite complies with local regulations?

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One way to mitigate some of the risks is to purchase insurance. Many brokers offer landlord insurance to cover the cost of certain repairs, protect against liability claims if someone is injured on the property, and may even cover loss of rental income due to insured loss or damage. For added peace of mind, some landlords require their tenants to apply for rent and damage insurance through a service such as locnest.com to cover losses due to unpaid rent or property damage.

Are you ready to own?

Buying a property with an income suite is not for everyone. Are you ready to do the maintenance of the rental property or will you hire someone to do it? Do you know how to find and evaluate a tenant? Are you ready to confront a tenant who doesn’t pay on time?

Learn about your rights, responsibilities and obligations before you take on the responsibility of becoming a homeowner. You can find a plain language summary of Quebec rental property laws at educaloi.qc.ca.

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