When you are working in the real estate investment world in Canada, one of the most common long-term goals for investors is the purchase of an apartment building or complex. It makes complete sense. If you go about it correctly, apartment buildings can be an incredibly attractive opportunity.
A step-by-step guide to buying an apartment building
- Determine if an apartment building is appropriate for you
- Mortgage expense
- Network to get work
- Add a ‘commercial’ pro to your entourage
- Know the neighborhood
- What kind of apartment are you getting?
- Look at the number
- How to invest in an apartment building
Take your time, do your homework, and maybe the owner of the apartment building will be in your future.
Decide whether an apartment building is right for you
When you buy an apartment building in Canada you will not be blinded by the ability to make money. There are certainly rewards to reap, but it is important to remember that owning and operating a multi-unit building takes a lot of work.
In the plus column, owning a building with multiple units means you will have month-to-month income. Apartment buildings allow you to meet your rental income by adding items such as vending machines and coin-op laundry.
Apartment construction expenses go beyond the mortgage
Once you have decided to purchase a multi-unit building, it is necessary to understand the additional expenses. When you buy a rental house, for example, your most important expense is probably your mortgage on that property as well as occasional maintenance services when something breaks down or the tenant moves out.
After entering your name on the dotted line of ownership of the apartment building, you will quickly realize that it is impossible to run an apartment without a backup.
Remember that keeping your tenants happy requires financial flexibility to appoint all the people you need.
Network to get work
The following step in buying an apartment building is to get the right property for your requirements.
The easiest way to start this process is to consult a local real estate network. By adding only professionals from all corners of the real estate industry, you will continuously build your cache within the community. Before we can discover a magnificent building to hear about it.
Add a ‘commercial’ pro to your entourage
When you first set about building a real estate investment portfolio, you undoubtedly learn to help many real estate professionals. A leasing broker and real estate agent are required for any good team.
Whenever you buy a building in Canada, which is larger than four units, you will exit the residential real estate world and leap into the commercial market.
When this happens, your best bet is to secure the services of an experienced commercial real estate agent. These professionals will understand the difference between a residential and commercial real estate that can make or break your deal.
At least one thing is the same, whether you are looking for a single-occupancy rental house or apartment building. To get the most out of your investment, you need to know the neighborhood. For starters, research the average local rent in your area. When you are buying your building, you will get an estimate of a starting price point.
Another important reason to investigate the neighborhood is to search for signs of new construction or renovation. These are signs that your community is on an upward economic trend, which may mean that you are meeting on the ground floor of a neighborhood revival. What kind of apartment are you getting?
Now that you understand what kind of neighborhood you are working with, you can apply that knowledge to buy the right type of building. For example, if you buy a property near a college campus (which has lots in Canada) or notice an abundance of bars and restaurants, you can choose a building mostly composed of studios and single-bedroom units.
Look at the number
When you finally pinpoint a potential building for purchase, the next thing to look for is a test of significant numbers:
- Several tenants currently in the building.
- Cost per unit indicates the individual cost per unit in the building based on your purchase price.
- The rent per tenant, as you might expect, is the average monthly rent you can expect to earn.
These three figures combined will give you some basic idea about the health of your purchase. They will also factor in interest rates that you can secure for commercial mortgages. A building with a high consistent occupancy rate, rental fees that are adequate for their neighborhood, and average-per-unit costs per unit are considered safe bets for banks, and this is not good news for you.
Renting Apartment in Canada
Canada is a country with outstanding natural beauty, free healthcare, great education, and red-hot housing demand. This is a list of five documents you need to begin your search for the right rental apartment in Canada, and how to get them.
Anywhere, Canadian landlords and property managers want to verify that you say who you are you will be, take care of the location and that you pay your rent on time. As a recent arrival in the country, you will have to face some additional challenges to gather all this evidence.
Follow the steps below to get organized. Then make several copies of each document and place each in an envelope with your name on it. Bring these packages of documents required to view each apartment.
Before starting your apartment search you will need to set up an account with a Canadian bank. All major banks have accounts designed specifically for newcomers in Canada and anyone can open an account, provided they provide two pieces of identification, such as passports, employee cards, with photographs, A Canadian certificate or naturalization of citizenship, or a permanent resident card.
The rules related to deposits and fees vary in each province or region. Make sure you know the law for your area, and never pay more than necessary.
If a landlord asks you for additional fees or deposits that you know are illegal in your province, go. If they do not know the most basic rules about renting or taking advantage of you, they are unlikely to be the kind of landlord you want to do business with.
Most landlords require a credit report that contains your credit score. A credit score is a number that shows how many bills and debts you have paid in the past. Landlords use the credit score as an indicator of financial health and to determine the risk you present in comparison to other tenants.
When landlords ask for your references, they are asking for the names and contact details of previous landlords. They usually require about three references. Good landlords will call your references to verify the information you have given and ask them about your character and suitability as a tenant.
Letter of employment
In addition to credit checks and references to people who can pledge for your character, you will need a letter to prove that you are employed or otherwise financially viable.