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Buying a Condo to Rent Out – A Good Idea for a Property Virgin

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8:56 pm
August 14, 2012


momoneymohouses

Vancouver, BC, Canada

Member

posts 20

So I live in Vancouver where houses and condos are ridiculously expensive, but my BF has some money tucked away and was thinking about buying a condo in the suburbs (way cheaper) and renting it out. The tenant's rent would cover almost the entire monthly mortgage payment, and we would continue to rent our apartment in Vancouver because we really like the location. Is this a good idea for someone who has never bought property before? He's looking at it as if it's a longterm investment seeing as the tenant would basically be paying his mortgage. Any thoughts from anyone who has invested in property before would be much appreciated!

Mo' Money Mo' Houses

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9:17 pm
August 14, 2012


momoneymohouses

Vancouver, BC, Canada

Member

posts 20

Also, just want to point out that I forgot to put an exclamation mark in the title, it's supposed to be a question but I don't know how to edit it after it's been posted.

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Personal finance with a dash of sass.

6:48 am
August 15, 2012


OneCentAtatime

Florida, USA

Member

posts 1778

You need to do the math. If you beat the long term stock market return with rental income, go for it.

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8:25 am
August 15, 2012


Eric – PersonalProfitability.com

Portland, OR

Member

posts 2120

I would not buy just to rent. I would rent out a place if you own and move out, but buying your first real estate just to rent out (cash flow negative) is a big risk with high potential downside. I would hold off until you are ready to buy yourself.

3:02 pm
August 15, 2012


momoneymohouses

Vancouver, BC, Canada

Member

posts 20

Eric – NarrowBridge.net said:

I would not buy just to rent. I would rent out a place if you own and move out, but buying your first real estate just to rent out (cash flow negative) is a big risk with high potential downside. I would hold off until you are ready to buy yourself.

Well that's kind of the issue. We can't afford to buy a place where we live and we don't want to move an hour of the city to own our own condo, but we definitely want to invest in property as the value of housing in the area goes up about 5 – 7% a year. My BF has a friend who does this and owns two places, one of which he lives in and the other he rents out. He usually only has to pay an additional $50 on top of the rent he gets to make his mortgage payments. It sure isn't as profitable I guess as buying a place in the states for super cheap and renting it out and making a profit from it. Thanks for your thoughts!

Mo' Money Mo' Houses

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8:41 am
August 16, 2012


Eric – PersonalProfitability.com

Portland, OR

Member

posts 2120

The markets are way different in Vancouver than where I live, that's for sure. I know real estate there is one of the most expensive in the world.

Remember, as a landlord your expenses are more than just the mortgage. You have to pay for things like insurance, taxes, HOA fees, and repairs. If you are already at a negative cash flow with the monthly expenses, you might be at a loss after a big repair comes up.

11:34 pm
August 19, 2012


Liquid

Vancouver BC, Canada

Member

posts 59

I've been thinking about buying a place to rent as well. Instead of condos however I've been researching commercial properties because leases are usually longer than 3 years, and I won't have to worry about strata fees, and repairs. If something breaks it's not the landlord's responsibility. The shop owner has to fix it or he loses business :) If your bf has the money I would encourage you guys to consider diversifying your investments. So maybe put 75% of it as a down payment on a condo, and use 25% to buy a private REIT, agricultural land, or maybe something else in the exempt market to spread out the risk. I think it's a good long term investment to buy real estate, and there are many different ways to do it. Good luck.

3:41 pm
August 20, 2012


momoneymohouses

Vancouver, BC, Canada

Member

posts 20

Eric – NarrowBridge.net said:

The markets are way different in Vancouver than where I live, that's for sure. I know real estate there is one of the most expensive in the world.

Remember, as a landlord your expenses are more than just the mortgage. You have to pay for things like insurance, taxes, HOA fees, and repairs. If you are already at a negative cash flow with the monthly expenses, you might be at a loss after a big repair comes up.

That's very true, and my BF has made sure to factor in all of those extra expenses too, but that's definitely a risk when buying, having a major repair to do. Thanks!

Mo' Money Mo' Houses

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Personal finance with a dash of sass.

3:43 pm
August 20, 2012


momoneymohouses

Vancouver, BC, Canada

Member

posts 20

Liquid said:

I've been thinking about buying a place to rent as well. Instead of condos however I've been researching commercial properties because leases are usually longer than 3 years, and I won't have to worry about strata fees, and repairs. If something breaks it's not the landlord's responsibility. The shop owner has to fix it or he loses business :) If your bf has the money I would encourage you guys to consider diversifying your investments. So maybe put 75% of it as a down payment on a condo, and use 25% to buy a private REIT, agricultural land, or maybe something else in the exempt market to spread out the risk. I think it's a good long term investment to buy real estate, and there are many different ways to do it. Good luck.

You know we've never thought about commercial real estate before, I'll let him know to look into it. Do you find it's hard to find renters/leasers for commercial properties? I guess it depends on the property. I just always see so many retail places up for lease for months or even years on my way to work so to me it looks like it might be harder to find a renter/leaser. But maybe doing both would be an option. Thanks for the advice!

Mo' Money Mo' Houses

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Personal finance with a dash of sass.

9:33 am
August 21, 2012


AmericanDebtProject

Member

posts 199

MoMoney! I would read Investing in Real Estate (Eldred) and make sure that the numbers work out, i.e., your rental payment will cover enough to pay everything (mortgage, taxes, HOA, insurance) and enough to set aside a percentage to cover maintenance and other issues. Commercial real estate is more complicated and can stay vacant for much longer (but on the other hand can secure a much longer lease when it is rented) so I would not go into CRE first. Good luck!

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8:05 pm
August 22, 2012


momoneymohouses

Vancouver, BC, Canada

Member

posts 20

momoneymohouses said:

Also, just want to point out that I forgot to put an exclamation mark in the title, it's supposed to be a question but I don't know how to edit it after it's been posted.

Damn it, I meant question mark!

Mo' Money Mo' Houses

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Personal finance with a dash of sass.

8:07 pm
August 22, 2012


momoneymohouses

Vancouver, BC, Canada

Member

posts 20

AmericanDebtProject said:

MoMoney! I would read Investing in Real Estate (Eldred) and make sure that the numbers work out, i.e., your rental payment will cover enough to pay everything (mortgage, taxes, HOA, insurance) and enough to set aside a percentage to cover maintenance and other issues. Commercial real estate is more complicated and can stay vacant for much longer (but on the other hand can secure a much longer lease when it is rented) so I would not go into CRE first. Good luck!

Thanks for the tip ADP! I think I will check out that book as I am a total book nerd when learning something new and love to just read everything on the subject. Ya I think he might start out with residential than eventually when we are both more experienced buyers and landlords look into commercial real estate. Thanks Laugh

Mo' Money Mo' Houses

momoneymohouses.com

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Personal finance with a dash of sass.

8:51 am
September 12, 2012


Ferratum

Guest

Eric – NarrowBridge.net said:

The markets are way different in Vancouver than where I live, that's for sure. I know real estate there is one of the most expensive in the world.

Remember, as a landlord your expenses are more than just the mortgage. You have to pay for things like insurance, taxes, HOA fees, and repairs. If you are already at a negative cash flow with the monthly expenses, you might be at a loss after a big repair comes up.

Great point Eric. Any unexpected costs could be a potential banana skin. Plus, you then have the added stress of chasing your tenant for late payments. 

 

Let us know how it goes, it's something that I'de be interested in doing over here in the UK. 


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