Just as there's a difference between renters and owners, there's a difference in the mindset of a rental income property investor versus that of a home owner looking for a residence. When considering a property purchase for yourself, emotional attachment comes naturally when envisioning your future "home sweet home". Part of my job as your Ottawa real estate professional is to help you weigh the neighbourhood and property factors in terms of a sound investment. While you're picturing Thanksgiving in your future dining room, I will be keeping an eye open for resale potential.
When looking at strictly rental income properties it's about cashflow, tax savings, tangible investment and return on equity. Where it becomes confusing is when considering owner-occupancy with a rental unit. This duplex scenario is an increasingly popular avenue into a desirable neighbourhood that might not otherwise be affordable without the rental income. It's a balancing act: "nesting" mode with your personal quarters, and "business mode" (expense-cutting for most) with the rental unit.
In hindsight with my triplex, I see I was overly "business" focusing efforts on renovation of the main and basement apartments, in order to attract the best tenants and obtain the highest rents. It worked! However when it came time to create my own home sweet home, I'd lost my steam! Sure, I painted it beautiful colours, installed unique light fixtures and set up my huge 18'X15' patio for entertaining, and a potted herb garden. Ironically, I only finished the closets, pantry and custom built-ins throughout as I became an absentee landlord! Efforts paid off, as I again had more interested parties than I had apartments to rent... however it took "business" mode for me to finally make it that home sweet home I'd envisioned. I enjoyed living in my finished pad for exactly one summer. On my twice annual visits, I can't help but feel a tad envious of the current tenants. Just a smidge. And then I picture myself depositing their monthly rent cheque and I feel all-better again!
Great insights. My rentals have primarily been single family homes. I have been considering duplexes or trriplexes.
Thanks, Charles! I'm curious: are you able, knowing that you'll never live in these single family homes - that they will be entirely home to someone else - to reign the buget in, and not buy as you would for your own residence?
Anneke, I think you've experienced the inevitable dilemma of owning small scale investments or mixed occupancy properties. I think you also discovered an interesting fact. There is a market today for well appointed rental properties. As residential properties age a bit an investor can benefit from some form of added value. That added value, as you have experienced creates more demand and attracts a better tenant. It can also serve to maintain tenant satifaction and therefore less turnover.
Thanks for putting it so well! It's true that I experience very little turnover in tenancy and the tenants are very attached to the look of their unit. Thanks for weighing in!
Anneke
When I look at a real estate investment, it is through a different set of eyes than what I might consider for my own home. Primarily I am concerned about cash flow. What is this type of property renting for, what are my expected costs each year, what is the cost of the money I will use to finance the down payment.
I usually build a model based on a ten to fifteen year holding period and look at what the expected returns are likely to be. Usually I am not so concerned about the property appreciation as I am the annual expected cash flows.