Investing in real estate can be a smart financial move. Rent is on the rise across Canada, with no signs of slowing down. It can make owning a rental property a very lucrative investment, but as with any investment, it also comes with risk.
Edmonton is one of the more affordable major cities in Canada, and if you’re an investor, finding an apartment for sale in Edmonton can be a great way to generate rental income.
Why Invest in Real Estate?
A robust, diversified investment portfolio should include assets that generate income. Investing in real estate is the most popular investment strategy for good reason. A rental property is a great way to add a significant amount of passive income to your portfolio. Investing in a rental property when you’re still earning an income can also shield you from some of the risks that come with becoming a landlord. Ideally, you can pay off the property and enjoy the income stream in your retirement.
Apartment vs. Condo: Is There a Difference?
These two words are often used interchangeably, but there are some real differences that are important to understand before you buy property.
An apartment is usually understood to be a suite of rooms that form a single residence, usually in a building with several of them. They can be in a high-rise, mid-rise, low-rise, or even within the structure of a single-family home or townhouse that has been subdivided into separate residences.
Condo, short for condominium, refers to a type of tenure, not the physical structure itself. When you buy a condo, you own the unit, but you share ownership of common areas and elements with other owners. For example, in a high-rise, you have control over the interior of the unit, but everyone’s condo fees go toward the maintenance of elevators and structural elements.
A condo can also be a townhouse, rowhouse, stacked townhouse, duplex, triplex, or even a single detached in a condo complex.
Is It a Good Investment: Consider Cash Flow
Before you buy an apartment or other rental property, you need to crunch some numbers. The secret to successful real estate investing is cash flow. As a general rule, you want to make sure your rental property generates a positive return, but this can be tough due to rising real estate prices and higher interest rates. There are several factors to consider:
- Purchase price
- Interest rate
- Monthly fees
- Legal and closing costs
- Annual property taxes
- Realtor fees
- Potential periods of vacancy
- Your amortization period
The monthly rent needs to cover all of these costs and more to keep yourself in positive cash flow. Once you have an estimate of complete costs, look up the rents for units like the one you want to buy in the neighbourhood.
Know Your Rights and Responsibilities
Before you lease out a unit to a tenant, you should know the rules and responsibilities of becoming a landlord. These vary from province to province and state to state. In Edmonton, there are no rent caps, but there are limits to the reasons you can evict a tenant. Make sure you understand both your rights and responsibilities to minimize your financial risks.
