Property values reached record-setting heights again last month, with double-digit increases in the price of single-family homes, condos and plexes.

The median price of single-family homes on the island of Montreal increased 12 per cent over the previous January to $526,800 — a record. The price of condos and plexes increased even more spectacularly, climbing 18 and 17 per cent, respectively. The median price of a condo on the island is now $369,000, while the median two- to five-unit plex has now reached $647,000.

Impressive increases like these may have you thinking it’s time to get in on the action and start investing in Montreal real estate. If it’s your first time buying a property you won’t live in, you should know that buying profitable investment property isn’t as easy as it looks.

Here are six tips to help you do your due diligence before putting an offer on an investment property:

1. Determine your investment objectives

Are you looking for an investment that will generate regular income for you on a monthly basis? Or are you OK with a property breaking even if you believe you can sell it at a profit five or 10 years from now? Or maybe you’re just looking for a mortgage helper and you don’t need the rental income to fully cover all the property’s expenses?

Whatever your objective, it’s best to clearly define what you’re looking to get out of your investment and when so you don’t end up saddled with a property that isn’t giving you the payoff you want.

2. Do the math before you look

Most buyers know their dream home when they see it. If you’re mainly buying for investment, however, the most important thing to see is that the numbers are in your favour.

Create a spreadsheet to calculate income vs. expenses for the properties that interest you, and don’t see anything that doesn’t deliver the return you’re looking for. Remember to factor in maintenance costs as well as a cushion in case of late payment or a delay in finding a new tenant.

If you do put in an offer, have your broker do a market analysis and factor in the revenue potential to come up with a fair price. Don’t assume the seller will take a lowball offer even if the property doesn’t break even at the current price. The seller’s willingness to negotiate will vary depending on local market dynamics and their personal situation.

According to Royal LePage realtor Sean Broady, Montreal is a seller’s market right now, but savvy buyers may have more luck finding profitable buildings — and better luck negotiating — in outlying areas.

“In N.D.G., if you’re trying to buy a plex, they’re selling for very good prices for sellers. Most are cash-flow negative, but it’s a hot market and they’re selling quickly, whereas a Valleyfield triplex may have more room to negotiate,” Broady said.

3. Don’t skip the inspection!

The lowest-priced building isn’t always the best deal. According to Broady, the big-ticket items are the most important to pay attention to, including the age of the heating system, windows and roof.

While newer buildings may cost more, they may have fewer maintenance headaches. In addition to your inspection report, you may also want to ask any current tenants if there are outstanding maintenance issues they are aware of. You will also need to ensure the building complies with all safety, sanitation, maintenance and zoning requirements.

If you have made an offer subject to inspection and you discover major defects or maintenance issues, the ball’s in your court: Depending on what you discover, you can try to negotiate an adjustment to the price, ask the seller to make necessary repairs or walk away from the deal.

4. Vet the tenants

If there are existing tenants, request copies of the lease agreements to verify key terms of the lease, including how long they have been there, when the lease is up, how much they pay in rent, and determine who is responsible for heating and electricity costs and things like snow removal. You can also check with the provincial Régie du Logement and the Court of Quebec to check if there are any complaints on file against the tenants for nonpayment of rent.

While a tenanted building is easier to secure financing for and offers some peace of mind for the buyer, the downside is that longtime tenants may be paying below-market rent. Conversely, a vacant or owner-occupied building can be more easily upgraded and re-listed at a higher monthly rate.

5. Read up on renters’ rights

Tenant protection laws are strict in Quebec. You can’t jack up the rent for no reason or evict a tenant — even a bad tenant — without effort (and sometimes, not at all). It’s a good idea to spend a bit of time familiarizing yourself with the law so you know your responsibilities as a landlord as well as what your tenants are and are not entitled to. A good place to start is Éducaloi’s plain-language legal resources for landlord and tenants, as well as the Régie du Logement’s guide for new landlords.

The Régie recommends new landlords should check if the former owners sent out notices of rent increase, or received a notice of non-renewal of lease, or any other recent notices, for example to sublet a unit or assign a lease.

6. Don’t overlook investing in a single-family home or condo

Plexes are far from the only type of property you can rent out, Broady noted. Single-family home or condo rentals mean you have fewer tenants to deal with, so you are more likely to have fewer maintenance calls. On the other hand, in a plex, if one unit is vacant you’ll still have income from the other suites to offset the building’s expenses.

“The single-family home rental market is very active,” Broady said. “There are shortages of these rentals not only on the Island but also Off-Island.”