It's been just over a year since my husband and I bought our first rental property, a duplex. Throughout the purchasing process, I realized that, on top of the mortgage, notary fees and the move itself, there were other expenses to consider. With that knowledge, I could better portrait our budget and discover a host of other important resources that could help me avoid any unpleasant surprises upon making the first purchase. Want my advice? Keep reading!
Knowing the real numbers
If you're a current homeowner, or are interested in eventually becoming one, here are some ways to get an accurate idea of potential expenses related to your home.
1- Electricity
When browsing properties for sale, I always consulted the hydro account to get a complete overview—it takes just a few seconds to get a total estimate. All you have to do is visit the Hydro-Quebec website and enter the building number and postal code. In my experience, older buildings often have higher electricity consumption due to poor insulation so having this tool on hand is a great way to calculate your bill, and see if it's too steep!
2- Property taxes
As a general rule, municipal and school taxes are listed on a property's sales receipt. However, it would be an excellent idea for you to check the last year of assessment and look ahead at the next one. For example, major renovations or higher market demand can increase the value of the evaluation and could significantly impact your tax bill. To view a property's assessment value, visit your city's website.
3- A maintenance and renovation budget
Personally, I love to plan for the unexpected! I do this by setting aside 1% to 2% of the property value in an account specifically for any incidences—it gives me peace of mind knowing that I’ve planned ahead should a major expense suddenly arise. I systematically include this amount in the overall costs of the property in question, which allows me to have a global financial picture that is close to the real costs.
Landlord responsibilities
When we bought our rental property, I made sure to do my homework and read quite a bit about being a landlord. This helped me understand my rights as a landlord and know what rules I have to follow with my tenants.
Rights and obligations of the lessor and lessee
This government website is a valuable resource looking at the rights and responsibilities of both parties involved. For example, I didn't know beforehand that we had to take possession of the apartment to live in it. But this process taught us that a tenant was entitled to ask for any moving-related expenses, which caught us off guard and wound up costing us a bit. Analyzing the site's different sections gives you the information you need to be better equipped and avoid any unforeseen surprises.
Organization is a must
In a way, having rental properties can feel a bit like owning a small business. Every month, I take care of the accounting to keep track of expenses and costs incurred. This process only takes about 15 minutes and saves me time when I file my taxes. Also, don't forget to have other essential documents for your tenants on hand, such as the RL-31 slip, notice of renewal of the lease, repossession of the dwelling, or modification of the lease clauses. Between tenants, I take pictures of the unit and keep them on file in case of any significant damage. These are simple steps that could potentially save you time and money down the line!
Property inspection report
Lastly, I strongly recommend you have a property inspection report performed on the property before finalizing the sale. This report allows you to highlight significant issues with the building that could potentially cost you a lot. In my experience, the property inspection report has helped me identify minor problems that need to be corrected to ensure proper property maintenance. Prevention is better than cure!
In short, these few resources will help you steer clear of any unpleasant surprises when making your first real estate purchase. Knowing the real figures allows you to budget fairly, and studying the basics when you become a rental property owner lets you understand your rights and responsibilities. Finally, the inspection report is a great tool to detect major problems on the house and serves as a guide to address any minor defects in construction.
