Fear can be a great motivator, but it can also be a great paralyzer too.
No matter how young or old you are, if you’ve never bought an investment property in Guelph before, inevitably there will be many fears that you will have about the whole rental and investment process.
Before I ever purchased a rental property, there were many questions I had for which I had no answers. I knew I wanted to achieve a goal of owning at least ten income properties outright and be able to live off their income for my retirement, but the big question was, “How do I get started?”
Without having the answers right in front of me, naturally fear arose and paralyzed my ability to make the decision to move forward. Ultimately, I was somehow able to break through that barrier, become willing to face those fears, and step out on a limb to purchase my first rental property.
These are a few of the many fears I had before I bought my first rental, and the answers that I’ve now come to understand after many years in the game.
Fear #1 – What if I can’t find tenants?
Understandably, this is a major concern for any first time investor. Fortunately for investors in Guelph, our city’s vacancy rate is the lowest in the Province and has been for quite sometime. At the end of the day, there is no guarantee that your unit will not sit vacant. However, having it located in a city with the lowest vacancy rate in the entire Province is a major advantage over all the other investors, in all the other cities in Ontario, that are making a go of it with a higher vacancy rate than Guelph’s. So I think the real question you need to ask yourself is, “If investors in other cities with higher vacancy rates can find tenants, why wouldn’t I be able to find tenants in Guelph?” The reality is, unless your rental property is an absolute dump that is bordering on the point of uninhabitability, chances are you will be able to find tenants in Guelph.
Fear #2 – What if the tenants destroy it?
We’ve all heard stories of someone who knows someone that bought an investment property, rented it out and had it destroyed. What those owners often fail to take accountability for is properly screening their tenants and listening to their gut instincts when interviewing them in their first meeting. Finding a tenant is no different than choosing a business partner. You wouldn’t stand outside the bankruptcy court to find your next partner in business would you? Then why would you accept someone with poor credit, a bad attitude, or an inability to afford the monthly rent as your next tenant? In my experience, nearly all issues involving tenants can be solved right off the bat by simply choosing the right ones to begin with. Nothing is ever fool proof, and yes some people will still surprise you, but by responsibly screening them and following your gut instinct around whether or not these people will be a good fit, you will be miles ahead of all the other landlords that anxiously rent out their units to the first person who shows any interest out of fear that their unit will sit vacant.
There is a common myth out there that good tenants don’t exist and I am here to tell you this is the farthest thing from the truth! Excellent tenants that pay their rent on time and take care of the property as if it were their own are an absolute pleasure to deal with, and tenants who make terrific “business partners” do exist! Honestly, they aren’t that hard to find in Guelph if you’re willing to stick it out and wait for the right ones to come along. To this day I have never had a tenant maliciously destroy any property that I own.
Fear #3 – What if house prices drop?
My best answer to this question is, if you don’t panic and sell your rental property while it’s down, it will likely never be an issue for you. If you buy your income property and it somehow drops $20,000 that next year, you’re only down that $20,000 if you actually sell your investment property! Chances are, if it did happen, it would be a minor dip in the market, which would correct itself again at some point, and your investment property’s value would then begin to rise again. Of course, there are no guarantees when it comes to investing in Real Estate and there is a certain amount of risk you must be willing to take in order to reap the rewards, but acting on logic rather than fear and waiting for the storm to pass is almost always your best chance of long-term success and survival when it comes to these types of scenarios.
Fear #4 – How will I know which rules to follow and what I can and cannot do as a landlord?
In Guelph, homeowners do not require any sort of a license or special permits from the city to become a landlord. What the City of Guelph does have are zoning restrictions and bylaws, which must be adhered to. This includes the number of people in a home, property features such as the legality of accessory apartments, and whether or not your particular type of rental property is legally allowed to operate or exist in that particular zone. Ontario’s Landlord and Tenant Board resolves disputes between landlords and tenants, and the relationship between each party is detailed in the Residential Tenancies Act. This Act will explain all the rules, regulations, responsibilities and rights for both landlords and tenants. Your rental property must also comply with the Ontario Building Code and the Ontario Fire Code. Other than these 4 sets of “guidelines”, if you will, there are really no other rules you have to worry about that pertain directly to the physical operation of your rental property unless your unit is a condo, in which case their set of rules apply as well. As far as the accounting side of it goes and all of the CRA do’s and don’ts, you would be best to consult with a Certified Professional Accountant about your specific financial situation. Once you get the hang of it all, it’s really not that hard to manage on a daily basis.
Fear #5 – How will I know I am making the right decisions?
This is where I will highly encourage each and every one of you who are considering investing in Real Estate to find yourself a mentor! It doesn’t have to be some big official relationship that everyone knows about, or that you announce to all of your family members. Heck, you don’t even have to tell the person that they’re mentoring you! You simply need to find someone that has achieved what you wish to accomplish that is willing to invest some time, energy and direction into helping you achieve your goals. This could be a family member or a friend, perhaps someone you work with or know in the trades. This could even be your Realtor. Whoever it is doesn’t really matter, so long as this person has what you want, has been through the process before, is willing to share their experience with you and that you trust has your best interests at heart. Inevitably, you will be faced with a situation or certain challenges, which you have never had to navigate before. Having someone in your corner that can help guide you through this is a much easier path than figuring it all out on your own and “learning the hard way”. Figuring out all of the little tricks and intricacies of the seasoned Real Estate Investor can be a long, painful, and expensive road if you choose to travel it on your own. You’re much better to find someone you can trust and look to for guidance during these times of uncertainty.
In summary, being fearful of purchasing an investment property is not the end of the world, nor does it mean you will never have the courage to pursue your dreams. Getting educated and staying informed is a great way to prepare yourself and help you to get ready to make the decision to move forward. Hanging around other investors and asking them how they overcame their fears will help motivate you and give yourself the confidence that you too can succeed. Building up the courage to take the big leap of faith into Real Estate Investing is something that happens overtime, not overnight. If there’s one thing I’ve learned more than anything else since starting my own journey, it’s that investing in Real Estate is certainly not for everyone, but it can be for anyone who is willing to push past their fears!
Until next time, Happy Investing!