You have found yourself wondering, “Should I sell or rent out my house?” In the fast-paced Ottawa real estate market of today, demand for rental properties has increased dramatically due to the low inventory of homes. This, in addition to high rental rates, makes renting out a home or condo as an investment an attractive idea.
However, there are no simple answers. Let’s dive deeper to answer the “sell or rent” question and address a few other questions that will help you make an informed decision.
1. How Are You Doing Financially?
Start with a good honest look at your financial situation. Before you start shopping for a second home (the one you plan to live in), check out typical Ottawa selling prices and figure out whether you can afford a second down payment. Experienced broker Paul Rushforth puts it plainly, “You have to have enough equity in your property to be able to pay the down payment on your new property.” It is also important to get preapproved for a second mortgage.
Remember, on top of the down payment and any closing costs and monthly mortgage payments for your new home, you will need a large enough cash flow to continue covering the mortgage on the rental property. This applies even if it ends up sitting empty for a few months – or the renters refuse to pay. In addition, you’ll be responsible for your rental property tax, repairs and maintenance, cleanup between tenants, and condo fees (if applicable).
Regarding income tax, rental income is taxable, although you can claim your expenses as tax deductions. It is noteworthy that when you eventually sell a rental home, it will be subject to capital gains tax, unlike a primary residence.
Do yourself a favour and crunch the numbers with the help of a real estate professional, and see whether you’ll receive a better return if you rent or sell your home.
2. Are You Comfortable Being A Landlord?
Next, ask yourself whether you’re up for the job of being a landlord (and it IS a job). “Being a landlord isn’t everyone’s cup of tea,” remarks Rushforth. Unless you are willing to pay someone to manage the rental for you, you’d better be prepared to deal with all kinds of people. And you’ll have to calm your inner neatnik regarding the condition tenants keep your home in
3. Do Location And Condition Of The Property Matter?
Yes, location and condition do matter. If you’ll be renting out your home, Paul has some tips.
“Obviously, the location, size and condition will play a part in how much the rent is going to be. In Ottawa, tenants renting in the downtown core will be paying more. Rent in some suburban or Ottawa outskirt areas may be lower.”
But beyond the amount of rent you can charge, it’s important to make sure your rental home is in good shape before you begin showing it. Why? It will help attract responsible, houseproud tenants. “If the property is in bad shape, you’ll be targeting tenants who will treat it as such. You want to find a tenant that loves the house and will treat it like their own,” says Rushforth.
PAUL’S INSIDER TIP: “Take responsibility for changing the furnace filter in the contract. This not only helps keep the furnace in good condition but also lets you check in on the property and converse with the tenants.”
If you plan to sell, location will also play a role in attracting potential buyers, although many would-be homeowners are looking outside central Ottawa these days.
4. How To Get Started Renting Out Your Property
Paul suggests starting your search for tenants on popular platforms. “To be honest, when people ask me where to start when renting out a property, I direct them to Kijiji. It’s very simple for people to do themselves with the right research.”
It sounds simple, but it is harder than it looks. “Although it’s pretty easy to find tenants (whether through Kijiji or other rental websites), it’s difficult to find the RIGHT tenant,” says Paul.
That’s where the “right research” is vital. Paul recommends looking into the following factors before choosing your tenants-to-be:
- Good credit score (680 or above)
- Solid employment
- The number of people that will be living in the property
- Whether or not the prospective tenants have pets
- Solid references, especially from their last landlord
“Obviously, having a real estate agent on your side when preparing to rent out is a huge advantage. We can set up your listing on MLS and Kijiji, write up the tenant contracts, and vet your tenants for you,” shares Rushforth.
“With a real estate agent, you’re protected. We’re professional negotiators, we understand contracts and can find the right tenants.”
Rent Or Sell? An Expert Opinion
To sum up, Paul Rushforth encourages renting your house, rather than selling when feasible. “I’m a big believer that the more doors you own, the wealthier you’ll be,” he adds.
He also sees the flip side. “If you don’t want to be a landlord, you don’t have enough equity in your property, and aren’t willing to take time and do this right, selling may make more sense.”
The Paul Rushforth Real Estate is savvy and professional and will guide you to the best decision. And whatever you choose, they will be at your side to help you rent or sell fast, safely, and for a great price!