By Jennifer Lynn Walker
Visiting properties, especially if you are new to the real estate business, can be an overwhelming task.
There is so much to look at, and everything is pulling your attention at once. It’s important to see past all the talk from the owner and listing broker and take in all the aspects about the “business” you are looking at.
It is the property owner’s legal duty to declare EVERYTHING they know about their property.
It is their legal duty to represent the property to the best of their ability. Not disclosing information they know that affects the property is illegal.
Having said that, not all owners are alike. Don’t trust the listing broker and the seller to paint the whole picture for you about the property you are visiting. Due your due diligence and uncover as much as you can about a property you are visiting.
Your goal is to find the best value in a property.
Here is a list that will help you discern between a good property and a great one when visiting properties.
- Keep in mind the kind of tenants you want. Make sure that you meet the tenants and learn as much as you can about them. Are they paying on time? Is the owner going through a legal case with one of the tenants? The tenants will be a direct influence on your business. They will either make your life easier or create a challenge for you.
- Are the rents at market value? This is very important. If the rents are quite far off of market value, in Québec, you’ll have a hard time raising them over 1-3 percent per year. The Regie du Logement dictates on an annual basis what that percentage will be. You can visit their website and use their calculator.
- Is the owner doing all his own renovations? Unless the owner is a tradesperson, I would be very worried about the quality of the work and the potential for hidden defects. Ask for invoices for renovations done.
- Does the building come with legal warranty? In Québec, legal warranty is a given unless otherwise stated in the listing. Please read for more information: https://www.montreal-realestate.ca/english/?s=legal+warranty
- Is there a pool? While this may attract a higher value tenant, you need to think of the upkeep and maintenance.
- Are there fireplaces? Most properties with fireplaces won’t have any legal warranty attached to them. While fireplaces may attract a higher value tenant, your building insurance will be much higher because of the risks involved. As well as, a lot of the municipalities are banning them.
- What are the neighbours like? Is there garbage & graffiti in the neighbourhood? Look around the street to see if there is evidence of a quiet, good neighbourhood. Knocking on doors and asking around is a terrific way to get a feel for your neighbourhood.
- What about the noise, smells, the overall vibe? Tune in to your gut feeling.
Always think to yourself, “what type of person would want to live here?”
- What about proximity to transportation and other amenities? A lot of renters like to be near public transportation. The closer the building is to busses and trains, the more sought after it becomes. Also look for proximity to daycares, shopping, and parks.
- What about crime? No one wants to live in an area where the crime rate is high. Most likely, the rents and property prices will be low in these areas. If you get a great deal on a building, you can still end up losing big if nobody wants to pay a decent rent or it only attracts tenants who won’t respect your property. Visit the police or online crime reports for information and statistics.
- What about the competition? Chances are that rental rates will go down when available apartments in an area exceed the demand. Conduct a survey on how many apartments there are to rent near the property. The vacancy rate has a big impact on your business.
- Are your aspirations in line with the area? Be careful not to be seduced by what real estate brokers call “highest and best uses”. If you are planning on renovating some of your apartments high-end, be careful of the value of what you are creating, compared to the type of neighbourhood you are in. If all the rents in the neighbourhood fetch $600 on averate, you might have a really hard time renting out a $1200 apartment.
All this work may feel a little daunting to someone just entering the real estate business. Take your time. The key is to work hard up front to ensure you set up the best possible business plan for your real estate investment.