Everything You Need To Know About Income Properties in Edmonton, Calgary and all of Alberta
Investing in rental properties is a great way to generate passive income and build personal wealth, but it’s not something to jump into without doing some homework. There are many factors that should be evaluated when purchasing an income property, and it often entails different considerations than when you purchase your own home. Understanding the needs of a future and often purely hypothetical tenant can seem impossible – especially for a first-time buyer – but there are a few key features to always look for that greatly increase your chances of success. Developing a passive income stream from a rental property requires a certain amount of knowledge and a lot of pre-planning, which is why our team at River City Financial is here to guide you through each step along the way.
The Requirements For A Rental Suite in Alberta
First things first. What are the legal requirements for a property to be used to generate income as a rental suite? In order to be eligible to rent out a portion of your house to tenants as an income property, your unit must have:
- Minimum ceiling height of 1.95m
- A direct exit door to the outdoors
- Each bedroom must have at least one window for emergency escape during a fire
- Fire protected walls and ceiling between the rental suite and main dwelling
- Fire protected walls around all exits
- Gas-fired furnaces and water heaters must also be enclosed in a room with fire protected walls
- Interconnected smoke alarms installed to cover both dwellings
- For pre-existing rental suites, the use of a single heating and ventilation system to serve both the main dwelling and rental suite is acceptable under the Alberta Fire Code.
[FREE CHECKLIST] Download our Alberta Income Property Regulations Checklist – Be safe… And by the book.
Location, Location, Location – Where to Locate your Rental Property
There’s a reason it’s such a common saying in the real estate investment industry. Understanding the features of the neighbourhood that your rental property is within is key to successfully getting and keeping tenants because it will show you who to market to and what to focus on when promoting your property. The overall quality of the neighbourhood that you make your real estate investment in will ultimately determine the type of tenants that you attract. If your income property is located downtown and near offices, then you can expect to attract more young business professionals that are looking to be close to work. Neighbourhoods with schools and playgrounds will attract families with children. Anything close to a university or college will greatly increase your potential renter pool, even though you may have vacancies in the summer months. Keep in mind that, with investment properties, the area and overall feel of the neighbourhood you buy in often determines the type of renter you’ll attract.
In the housing market, a desirable neighbourhood is one that provides an opportunity for growth, and there’s no better indication of growth than nearby schools. Families will always prefer to have their children attend a school close to home, so your potential pool of tenants will automatically increase by choosing a property situated near K-12 schools. Having a rental property near a college or university is also a huge benefit with a large population of students, instructors, and other institutional employees entering your pool of potential renters.
When exploring potential income properties, be sure to keep a close eye on what services are located within a close proximity. Grocery stores, banking options, and retail outlets are always good to have nearby, and they are all things potential renters will take note of.
Find Creative Ways to Add Value to your Income Property
Any property that doesn’t increase in value over time isn’t a worthy investment, so consider any potential updates and upgrades to add value within the property. You want to sell potential tenants from the moment they set eyes on your property, so general updates like new fixtures and fittings to landscaping and curb appeal can go a long way in adding value to your income property. Make sure to calculate the costs of the upgrades against the potential increase in value to determine how much you can afford to spend on the updates.
Be hyper-aware of the deadlines you set for yourself regarding any renovations and upgrades, as the longer you go without a tenant, the more it will cost you as you’re paying the entirety of the mortgage and utilities. This can take a serious dent out of your bottom line income stream if you’re not diligent in planning and budgeting right from the start.
Here are some simple DIYs that will add value to your property without breaking the bank:
Revamp Your Bathrooms
One area of the home that particularly benefits from some extra attention is your bathroom. This space is typically left looking a little generic, so investing some time to inject a little character to this room will help your income property stand out and increase its value. A few quick upgrades could include:
- Replacing old faucets and showerheads with a new and modern style.
- Adding interesting wallpaper as a feature behind the mirror/vanity.
- Updating light fixtures with something unique and memorable.
Focus On The Kitchen
One of the most important rooms in a home is the kitchen, so it’s no surprise that focusing on this space would be a good a idea. However, kitchen renovations can be quite expensive – instead, try these DIYs to freshen up the room.
- Rather than replacing old or worn cabinets, try painting them. Tip: Painting cabinets white is a great way to modernize a dated kitchen and it will also make the space appear to be larger.
- Swap out cabinet hardware with something sleek.
- Consider hanging a pot rack over a kitchen counter or island. This will add an appealing visual element to the room, plus it will instantly add more storage space.