There are many reasons why homeowners choose to get into the rental market. Many choose to rent out their homes while waiting for the market to improve. Some homeowners want to generate rental income from a second home or vacation property. Still others find themselves with multiple properties in hand after large life events, such as marriage, relocation, or inheritance.

Regardless of the reasons for getting into the business of renting properties, it’s important to get started on the right foot. That involves asking yourself some hard questions, doing your research, calling in the experts, and even putting in some elbow grease to get your property ready for the rental market. Here’s a quick guide to what’s involved.

Mull it over
Owning a rental property is much more than just collecting payments every month. As a landlord, you are legally responsible for providing a safe, livable home for your tenants, as well as maintaining the property with timely repairs. Consider that owning and maintaining rental properties is running a business. Ensure that you have the time, resources, skills, and patience for the often-unpredictable nature of the industry.

Do your research
Take a long, hard look at your rental unit and write a list of its attributes, including square footage, neighborhood, number of bedrooms and bathrooms, amenities, and yard size. Then, search for comparable units online to get a good idea for how much you’ll be able to charge.

Number crunching
Once you know how much you’ll be able to charge for your rental property, consider additional costs, such as the increased price of homeowners’ insurance, the cost of maintenance and repairs, unanticipated damage by occupants, carrying costs between tenants, and advertising, to name a few.

To outsource, or not to outsource?
If you are interested in renting your property, but don’t want to fulfill the role of landlord, consider hiring a property management company. In exchange for a monthly fee, property managers will find and screen tenants, serve as the main point of contact for occupants, manage repairs, collect rent payments, and tackle other duties.

Consult a lawyer and accountant
Rental income must be reported on your taxes, but some expenses may be tax deductible. Consult a qualified accountant to explore the potential financial gains and losses that come with renting property.

Additionally, consult a real estate attorney in your local area. While you may be able to find sample rental contracts online, a lawyer who is familiar with laws and regulations in your local area will make sure that the lease agreement your tenants will sign is legal, appropriate, and protects you in case of unexpected events.

Prepare the property
Lastly, get the property itself ready for listing. This can mean tasks as minor as removing your personal belongings, or more substantial improvements like upgrading appliances and painting. If you’re utilizing a property management company, ask them for tips on how to get your property rental ready.

With good preparation, consultations from experts, and an honest look at the finances involved, homeowners can find renting property to be a beneficial way to increase income, delay selling a home until the market improves, or cover costs associated with owning multiple properties.

Before you start looking at homes, you should figure out what you can afford by getting pre-approved for a mortgage. Doing some calculations of your own may give you a rough number but with so many factors involved it’s always best to get in touch with a Mortgage Specialist like myself.

Keep in mind that being “pre-qualified” and “pre-approved” are two very different things despite the terms becoming interchangeable over time. Pre-qualifying for a mortgage involves a quick review of your finances to estimate an approximate amount of a mortgage that you may be able to qualify for. On the other hand being pre-approved means actually applying for a mortgage with the approval subject to the home qualifying as well.

Real estate agents and sellers alike often prefer to work with buyers who have already been pre-approved for a mortgage because it saves everyone a lot of time knowing that you can afford the asking price. In multiple offer situations most sellers will also accept an offer from a pre-approved buyer before considering anyone else.

In order to get pre-approved we will need to:

1. Gather Financial Information

Provide as much financial information as you can including recent pay stubs, previous tax returns, proof of assets and liabilities along with any debts you may have. The more information I have the easier it will be to get you pre-approved.

1. Calculate Your Total Debt Service (TDS)

Your Total Debt Service is an accurate measure of your ability to pay your mortgage by taking into account monthly obligations like car or credit card payments and housing costs. A TDS of 40% or below would be ideal. If you happen to be higher debt consolidation might give you some relief.

1. Perform a Credit Check

To perform a credit check I’ll need your social insurance number along with your spouse’s or any co-signer.

It’s always a good idea to request a credit report beforehand in case there are discrepancies. That way you have time to address problems before the process even begins. You are entitled to a free credit report more than once a year so long as it’s requested in writing and you choose to receive the printed copy by mail.

Once we’ve gone over your financial information, marital status etc. you will need to sign some disclosures. At that point your mortgage application will be reviewed, signed and submitted through the underwriting process. When approved Affinity Credit Union will issue a pre-approval letter which outlines the terms of the mortgage approval.

Congratulations! Now that you’re pre-approved for your mortgage you can begin looking for your new home!

March is filled with sweet candy, chocolate treats, beautiful bouquets of flowers, and hearts…lots of hearts…everywhere! But, don’t forget to share some of the love with your home! This month’s Home Maintenance Checklist features our annual safety check, which ensures your home’s safety features are preforming properly and that any potential hazards are avoided. Follow these steps and you’ll be on your way to a safer home environment:

• Doors – check hinges are working properly and secure and seal tightly

• Test smoke detector & carbon monoxide (CO) detector – change batteries every six months (when you change your clocks is a good practice)

• Test window locks are working properly

• Test security system (if applicable)

• Potential fire hazards – electrical, natural gas and flammable liquids

• Ensure adequate clearance around furnace, hot water tank, and electrical panel

In addition to our annual safety check, be sure cross off the below items to keep your home in tip-top shape this month:

•  Clean or replace furnace filter, HRV or humidifier filter (if applicable)
  
  
•  Clean range hood/OTR filter
  
  
• Check exhaust fans for snow build-up around hot water tank and furnace vents. If you live within a condominium, please notify your property manager regarding any build up.
  
  
• Perform annual safety check

Many people mistakenly believe that home ownership isn’t an option for them but the fact is that there are multiple ways to acquire a down payment. Pair that with record low interest rates and it would be foolish not to buy in 2012.

Right now the minimum down payment required in Canada is just 5% of the homes purchase price. However, as a general rule, you should put as much money down as possible. That amount will determine which home you purchase, the size of your mortgage payments along with just how much insurance you have to pay.

Here are some ways in which you can obtain a down payment:

Purchaser’s Savings
January 1st, 2012 introduced the First-Time Homebuyers’ Tax Credit. It will provide a provincial non-refundable income tax credit of up to $1,100 for eligible taxpayers. While the details of the program are still being developed it is known that the personal income tax credit applies to qualifying homes purchased after December 31st, 2011.

Interim Financing
Interim financing (bridge financing) is used when a buyer needs to sell their current home in order to purchase another but the sale of the first home can’t be completed before the purchase of the second. Even though this situation would have the buyer paying more interest, it’s usually nominal and only for a short time.

Rent-to-Own
When you rent-to-own a portion of the rent you’re paying actually becomes your equity once you purchase that property. In order for this to work though the purchase agreement:

• Must acknowledge that a portion of the rent includes a pre-payment of equity on a monthly basis.
• Must show that the monthly rent payment is an amount in excess of the current market rent for the property.
• Must contain at least a partial refund in the event that the purchaser doesn’t exercise their right to buy the property.

In the chance that the property’s value decreases the surplus rent may not be accepted as equity when eventually applying for a mortgage.

Gift from an Immediate Relative
In the instance where a home buyer is unable to come up with a down payment they can seek assistance from an immediate family member if the funds are clear of any repayment obligation. You simply need a mortgage gift letter from them stating that this is the case. Also note that gift money must be in the buyer’s possession at least 15 days prior to closing.

Borrowed Against a Proven Asset
The Canadian Mortgage Housing Corporation (CMHC) permits down payments that have been borrowed against proven assets so long as those assets are “financial in nature, unencumbered by debt, and readily convertible to cash.”

Home Buyers’ Plan (HBP)
First-time home buyers are able to withdraw up to $25,000 from Registered Retirement Savings Plans (RRSPs) like the Home Buyers’ Plan (HBP) to be used toward a home purchase, tax-free. Just be sure that your RRSP contributions sit for at least 90 days prior to being withdrawn in order to be deductible. They also need to be repaid within 15 years.

Affinity Equity Building Program
The Affinity Equity Building Program is a partnership between the city of Saskatoon and Affinity Credit Union. In order to be eligible for the program the applicant must:

• Purchase property that they will reside in within the corporate boundaries of Saskatoon therefore causing a rental unit within the city to become available.
• Have a household income that ranges between $44,500 to $70,000.
• Repay the funds over a five year period.

Now that we have reviewed down payment options you can contact me to get pre-approved for your mortgage and begin looking for your new home right away!