The pros and cons of buying an income property in Vancouver in 2019

By | 2019-10-02T16:59:23-07:00 October 18th, 2019|Investment Properties|

With Vancouver’s real estate market returning to “more typical levels”, now may be the time to consider investing in an income property. Not sure if buying an income property in Vancouver is right for you? We have put together some pros and cons to help you decide. 

The pros of buying an income property in Vancouver 

1. Predictable monthly income 

An income property in Vancouver can be a reliable source of revenue as long as you have tenants in the home. Who would not want to make additional money every month? The best part is that when you are done with your income property, you can always put it back on the market. 

2. Increasing property values 

Property values are generally trending up. That means if you can buy the right property at the right price, you are going to have an asset that increases your wealth for years to come. The trick is to not overpay for your income property in Vancouver. If you pay too much off the bat, then you will have a difficult time recouping your money – and will have to hold on to the income property for longer to do so. 

3. Tax breaks 

There are a number of tax breaks available for income properties. You can write off everything from your home insurance to heating to mortgage insurance. This can be important, especially if you are in a higher income bracket. 

The cons of buying an income property in Vancouver 

1. High upfront costs 

Income properties in Vancouver may be getting more affordable, but they still carry a high upfront cost as you will need to make a down payment right at the start. Keep in mind that down payments are also higher for second properties. In fact, in Vancouver, you can expect to pay 20% down. Then you will need to cover your monthly mortgage payments. This can be a heavy burden for the first couple of months while you are finding a tenant. Remember, you will also need a financial cushion set aside to cover mortgage payments in case you have any issues renting the property out.

2. Liquidity issues 

When you have an income property, you tie up your money. Suddenly, you cannot just pull money out of the bank when you need it. If you want to pull money out of your income property, it will take time. You will have to put the property on the market, hold open houses, and wait for it to sell. If the market is not in a good place, you may have to wait it out or take a loss on the property or a low return on your investment. Given this, it is important that you do not require the money you are putting into your income property any time soon.

3. Responsibility 

You will be the landlord for your income property in Vancouver. That means you will be responsible for maintaining a certain standard of living for your tenants. You have to deal with issues that arise and make sure repairs are taken care of. These issues do not have a 9-5 schedule either. You may have to handle them at any time, day or night. You may also have to handle tenant issues. If this sounds like too much responsibility, you may not want to buy an income property at this time. 

If you are ready for an income property in Vancouver 

Do you still want an income property in Vancouver after reading all the pros and cons? Then it is time to look for a property to buy! As you are looking remember to keep a few key things in mind. 

1. Location

Is the income property you are considering in a desirable area? Is it close to key items like grocery stores, pharmacies, and public transit? Is it somewhere that you think will draw tenants for years to come? 

Remember, where your home is located will influence the type of tenants you get and the rent you can charge. For example, if you are buying an income property close to a college or university, you may want to choose a property suitable for students. If you are right downtown, you may be looking at working professionals who can afford higher rents.  

2. State of repair 

All the repairs needed in an income property fall on you. Therefore, if you buy a fixer-upper, you will need to factor the cost of the repairs into your financial planning. Make sure you have a thorough analysis of the state of the home done before you make a purchase. 

3. The financials 

You need to know that your income property will be financially worthwhile before you buy it. The best way to do that is to crunch the numbers. Find out what the costs of the property will be and how much the average rent is for similar places in the area. 

Ready to buy an income property in Vancouver? Make sure you look into these elements first.