Investing in rental real estate can be one of the most effective ways to build long-term wealth, but success depends on more than just finding a property that looks good on paper. Before you buy, it’s essential to do a thorough analysis of the property’s condition, operating costs, and income potential. Here are five critical things to look out for when purchasing a rental property.
1. Vacancy Rate & Rental Income Projections
The rental income is the lifeblood of your investment, but it’s important to account for times when the property may sit empty. Even in strong markets, tenants move out, and turnovers take time.
• Research the local vacancy rate to get a realistic picture of how often units may be vacant.
• Stress-test your numbers by assuming at least one month of vacancy per year (or higher if the local vacancy rate is above average).
• Factor in market rents vs. actual rents to see if the property is under-rented or overpriced compared to comparable properties.
2. Upcoming Capital Expenditures (CapEx)
Big-ticket repairs can turn a profitable property into a money pit if you don’t plan ahead. Before purchasing, assess the age and condition of key components such as:
• Roof
• Furnace or boiler
• Windows and doors
• Plumbing and electrical systems
• Appliances (if included)
If any of these are nearing the end of their useful life, budget accordingly. A roof replacement or boiler repair can cost tens of thousands of dollars—having a CapEx reserve will protect your cash flow.
3. Interior & Exterior Maintenance Costs
Every property requires upkeep, but the age, size, and style of the building can drastically affect ongoing maintenance costs.
• Interior: flooring replacement, painting, appliance repairs, and plumbing issues are common recurring expenses.
• Exterior: siding, painting, landscaping, snow removal, lawn care, and driveway repairs add to long-term costs.
• Cleaning & turnovers: professional cleaning between tenants is often necessary to keep units rentable and attract quality tenants.
A well-maintained property may have slightly higher upfront costs but will save you significantly over time compared to a poorly maintained one.
4. Safety & Compliance
Tenant safety isn’t optional—it’s a legal and financial responsibility. Ensure the property meets all local building and fire codes:
• Functional smoke and carbon monoxide detectors in every unit.
• Fire alarms, extinguishers, and emergency exits where required.
• Adequate locks, lighting, and security measures.
• Compliance with local landlord-tenant regulations, including habitability standards.
Failure to meet safety codes not only risks tenant well-being but can also expose you to liability and costly fines.
5. Insurance & Risk Management
A rental property should be fully protected with the right insurance coverage. Standard homeowner policies often aren’t enough—you’ll need a landlord insurance policy that includes:
• Property coverage (structure, appliances, fixtures)
• Liability protection (in case of tenant or visitor injuries)
• Loss of rental income (if the property becomes uninhabitable due to fire, flood, or other disasters)
• Coverage for tenant vandalism*
*Keep in mind not all policies include this automatically, but it’s worth ensuring your plan covers intentional or accidental damage caused by tenants.
Insurance premiums vary widely depending on the location, age, and condition of the property, so always get a quote before removing conditions. Building in protection against vandalism adds peace of mind and ensures unexpected damage won’t erode your returns.
Ready to Invest? Let’s Analyze Together
Finding the right property is about more than just looking for a dwelling —it’s about numbers. I can help you identify strong investment opportunities by analyzing rental income potential, calculating costs, and stress-testing cash flow. Using detailed Excel spreadsheets, I’ll gather property data, break down vacancy assumptions, maintenance costs, and long-term reserves so you know exactly what to expect before you buy.
If you’re ready to start building wealth through real estate investing, let’s connect—I’d love to help you find and evaluate your next investment property.
Melissa Morin • Team Lead & REALTOR® @ The Melissa Morin Team w/ C21 Maximum 403-318-5665 • Melissa.morin@century21.ca
