What does ‘Property Type Mean’?
The phrase ‘property type’ refers to the ‘type’ of rental property that you will be buying. Examples of property types can be:
- detached homes
- semi detached homes
- condominiums, and
- multi-family buildings (such as duplexes, triplexes, etc.)
It is important to know what your property type is before you begin looking at potential rental properties to purchase. This is important for a number of reasons.
Reason Number One
Defining your property type provides you with direction. Knowing what type of property you are going to buy will make your search more efficient. It will save you time with your search. If you don’t know what property type you are buying, you will be bouncing all over the place with no focus. One day you might view a potential rental property that is a townhouse, the other day you might view a potential rental property that is a multi-unit building.
Reason Number Two
Since a townhouse and a multi-unit building are different property types, you might possibly have different tenant profiles as well with these property types. This is an important factor to consider, as it is always wise to know your tenant profile. It is good to know your tenant profile because it is good to know what you are getting into. For instance, if your tenant profile consists of people that are ‘rough around the edges’ that don’t pay rent on time, this is crucial to know. You don’t want to have a rude awakening the first time you have a bounced rent cheque. This is a risk that you can mitigate by knowing your tenant profile.
Reason Number Three
Also your required down payment for these 2 property types might be very different. Your bank or lender might have different criteria in terms of down payment for the purchase of a townhouse versus the purchase of a multi-unit building. Since the two properties will probably vary dramatically in purchase price, there is no question that a different amount of funds would be required as a down payment.