Many people find buying or converting their primary residence to an investment property unexpectedly complex. Choosing the right property and hiring professional property management are critical decisions. Real estate professionals are key in guiding their clients with these key decisions.

 

Investment property types: Pros and cons

 

Choosing an investment property type has the potential to be difficult for clients, as each comes with distinct advantages and disadvantages. Vacation rentals, fully furnished executive rentals and unfurnished residential rentals cater to different markets:

• Vacation rentals offer high short-term income potential and flexibility but require intensive management and face regulatory challenges.
• Fully furnished executive rentals attract business professionals seeking convenience for medium-term stays, offering steady income and reduced turnover, though furnishings can increase costs and wear.
• Unfurnished residential rentals target long-term tenants, providing consistent income and lower upkeep, but may lack flexibility and have more extended vacancy periods. 

Realtors must consider market demand, regulations and client goals when recommending these options, balancing profitability with the specific needs of landlords and tenants.

Clients also need to consider the financial aspects of their investments carefully. While rental income is often the primary focus, many other factors come into play when purchasing a rental property.

“When I have a client looking at investment properties, we discuss everything at the beginning of the sales process,” says Julia Stauffer, real estate agent with Macdonald Realty in West Vancouver.

“I want to ensure they have their finances in order beforehand. Many clients overlook the costs associated with these properties. Depending on the property, there can be mortgage fees, property taxes and maintenance costs. Too often, people focus solely on rental income and fail to account for these expenses.”

Phillip Davies, owner of Cartref Properties, echoes this sentiment. “When I bring on a new rental client, I always advise them that operating costs can vary, impacting their income. A rental property is no different from other investments. I tell them it should be treated as a long-term investment and held for at least five years.”

 

Complexities of rentals in an ever-changing market

 

However, buying the property is only the first step. For many owners, understanding the complexities of rentals can be overwhelming, and rental agreements, provincial regulations and market trends are just some of the factors to consider when renting a property.

Clients choosing to hire a professional property manager or take on the responsibility themselves can greatly impact their experience. “Part of my discussion with clients involves the management process. It comes down to the buyer’s confidence and experience level when deciding whether to hire a professional manager,” says Stauffer.

“The Metro Vancouver rental market is difficult for landlords right now. There are ever-changing regulations to keep up with, and mistakes have costly ramifications for landlords. We’re also seeing an increase in availability, so understanding how to market units is key. Rental units are staying vacant slightly longer, and rent prices are trending downward,” Davies adds.

 

The right representation matters; experience and transparency are key

 

The right representation matters, and finding a good fit with a property manager is crucial. Clients are often referred to management companies through their colleagues, friends or realtors.

Wallis Lee, Managing Broker at Sutton Max Realty and Property Management, notes that her team is often involved during the sale. “80 to 90 per cent of our clients come from referrals, particularly from realtors. We’re often asked to provide a quote for rental management as part of the sales package,” Lee explains.

“Sales is a full-time job, and so is property management. It’s impossible to do both effectively while providing the best service to clients,” she adds, emphasizing the importance of working with a specialized manager. Lee notes that property management is more than simply renting the unit. There’s ongoing coordination of the property, from daily operations to financial needs.

Davies agrees and highlights the importance of hiring a manager experienced in handling the specific property type being rented. He also stresses the need for financial transparency. A reliable management company should provide regular financial statements detailing the rental’s income and expenditures.

 

Investing in rental properties can be complex for the uninitiated. It requires careful planning, financial preparation and an understanding of complex regulations. With the proper guidance from real estate professionals and property managers, buyers can make informed decisions about how to best manage their assets.