the Wealthy Canadian

There is another avenue of real estate ownership available to the real estate investor. This mode of ownership creates a landlord-tenant relationship because your revenue is garnered through rental fees. This is another “buy and hold” situation that requires a good deal of research whether you are investing in residential or commercial properties. Having a rental property is supposed to provide you with a steady stream of positive cash flow, but if not handled properly, it will drain your confidence and your bank account.

When considering a rental property, you have to take your tenants into account. In the case of commercial leases or month-to-month rentals, you should examine what your tenants have to offer in products and services. This doesn’t mean that you have to go into business with them, but there are certain aspects of their business dealings of which you should be aware. For instance, the stability of their business plan and future projections will impact your revenue. This will protect you from fly-by-night operations that tend to close their doors and claim bankruptcy before paying off their creditors — of which you may be one. Other things that come into play in a commercial environment are improvements, modifications and utilities. Rental agreements are often a point of negotiation, and you should keep abreast of costs and responsibilities. This is where solid contractual agreements between yourself and your tenants come into play. Clearly outlining responsibilities in regards to upkeep, modifications and improvements will not only give you a clear picture of your actual revenue, but it will also protect you from those nasty and often costly misunderstandings.

In the case of residential tenants, you need to be sure of their ability to pay and their promise to treat your property with the respect necessary to ensure years of trouble-free rental. You can never eliminate the unseen, but checking references and ensuring that you get such things as first and last months rent and security deposits will help shield you from being ripped off and help to ensure that the tenant takes due care with your property. Look into your local Residential Tenancy Act (or similar) to become familiar with your rights and obligations.

Whether you intend to directly control your rental property or wish to leave it in the hands of a third party, you need to do your research and take the precautions necessary to ensure that your rental property is a reason for your success and not your bankruptcy.

In our final article, we will discuss how all of these real estate investment opportunities are available to you in a depressed market.