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Old 08-12-2018, 06:17 PM
srs123 srs123 is offline
 
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Default Income properties

Thinking of buying my first income property in the next few months and was wondering if anyone has any advice of pit falls and things to look for. My only 2 friends who have income properties are currently giving me conflicting advice. One says , only buy condos while the other says houses.

What do you guys think? Also any other advice you got would be appreciated
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  #2  
Old 08-12-2018, 06:39 PM
TargetRick TargetRick is offline
 
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Default rental agent

Whichever way you go, condos or houses, GET A RENTAL AGENT!!!

I'm not a rental agent, nor am I in any way related to any. Me, I'm a unit owner in a condo building. You'll find that when renting, you will meet some good renters, but you will more than likely meet more of the least outstanding people in the world. I know - I tend to see them in action every day.

The rental agent will yes, cost you some income as they screen and sometimes boot renters. I'd wager the cost of the rental agent is worth way, way more than the agro of personal dealing with renters. Kind of similar to how the added cost of good ammo tends to be be really, really small compared to the overall good shooting you get.

Funny but true story: some decades ago my brother-in-law was in a rental property club with a bunch of other guys. In those pre-debit days, rent was personally collected each month. One day he was a day late to collect rent, and the renters told him, "oh, you were late about the rent so we spent all the money on beer."

One funny but good argument for getting a rental agent.
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  #3  
Old 08-12-2018, 06:41 PM
TargetRick TargetRick is offline
 
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Default house or condo?

BTW on whether to invest in houses or condos, I'd say houses.

Reason is, there a boatload of new condos being built, so prices for existing condos tend to be pushed down.
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Old 08-12-2018, 06:43 PM
Etownpaul Etownpaul is offline
 
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I’ve currently got an income condo in downtown Edmonton. Location is really key for the condo market. I don’t have a problem finding young professionals to rent my place out to downtown. If you had a condo in the burbs you will have a different demographic and you might have a harder time finding renters.

Condos are great maintenance wise since the condo fees take care of most of the maintenance for you. If you are going to get a condo, make sure you can get a spot on the condo board. I’d never own a condo without being on the board. You need to know where your condo fee money is going and sometimes people on condo boards get over eager to spend that money. Or they are too scared to raise the condo fees to a sustainable level that an repairs require a special assessment.

Get the last 2 reserve fund studies from the property management company before you buy. That will give you an idea if any large expenditures are in the future. I’d walk away from any building that didn’t have a decent reserve fund and a favourable reserve fund study.

Houses gain more value than condos and you can usually get a better profit margin on the rent vs expenses. The downside is that tenants don’t usually do much yard or house maintenance, so you either have to sub that out ($) or do it yourself (time consuming).

Condos are nice because if managed properly, a portion of the condo fees should go into a reserve fund to pay for future repairs. If the roof needs replacing on a house you are on the hook for all of it.

If I had to do it over again, I’d probably buy a bungalow in a central area with a legal basement suite. If you rented out the two floors separately, you could get a nice return on your investment.
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Old 08-12-2018, 06:46 PM
bsmitty27 bsmitty27 is offline
 
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House with basement suite!
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Old 08-12-2018, 06:58 PM
SHEDHEAD SHEDHEAD is offline
 
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Quote:
Originally Posted by bsmitty27 View Post
House with basement suite!
Agreed! All 3 of mine are suited. Income is a lot higher than renting the house as a whole! Plus limits your risk of having a period with no tenant.
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  #7  
Old 08-12-2018, 07:33 PM
MooseRiverTrapper MooseRiverTrapper is online now
 
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Invermere/Kelowna vacation condo with view of the the lake. Fully furnished. For 350k. If you get lucky and rent in the winter it’s a real money maker.
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Old 08-12-2018, 07:55 PM
RBI RBI is offline
 
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First thing is to know for yourself , is how much time and effort you are or are not willing to put into this venture.

Are you going to be a property owner/landlord or just a property owner/ invester

Are you going to do all that is required to look after it/tenants yourself , or are you going to hire a management company

Certainly one make more money doing everything themselves , but that can also be a pain in the kiester . You're kind of going to be " on call " 24 hrs a day .

Days, weeks and even months can go by without a problem , but when that problem does show, it's your job to solve it . ...leaky tap , that can usually wait for a couple of days ... call at 2 in the morning when it's 30 below that the furnace stopped working ... well you better have Cabber's number ( and hope it's not hunting season ) :-)

The tenant calls " The fridge isn't working and I just put $ 200 worth of food in it ".... $ 150 plus for a repair man only to tell you that the compressor is done and it's a $ 500 repair . So now you have to go buy a new fridge or stove or whatever , cause unlike your own home, you can't put these things off .

On the other hand , if you hire a management company to look after things , the only concern you have is paying their bills .

I'm sure these companies get a good price from all the plumbers , electricians , painters etc that " They " call, I'm just not so sure that's the price on the bill that you'll see.


I personally wouldn't buy into a condo , as you don't have full control of everything, and of course " condo fees " can be a headache as well .

They do have some advantages , but for an income property , the math usually doesn't work .( very well )

You pay x number of $ for the unit , and generally, expect rent to cover a mortgage , but then you also have to cover condo fees as well. and they can take a big chunk out any monthly positive cash flow .

Certainly, this isn't the case with all, but a lot depends on a lot of different variables

That all being said, I have never directly been involved with a condo as an owner.

And if someones got some infor that shows different numbers or advantages to owning a condo ( very possible ) , I would love to hear/learn from those .

And on top of all this , if you go with a management company to take care of it , there goes another 10 %

The only real advantage of a condo vs a house or multi , is they are usually a lot less $ to purchase .

My family has had rentals since , well the one I was born in

And for the last 30 years, I've been the one taking care of them ( so I know what I'm talking about when I say " being on call " )

They have been paid off for many years now , so my parents are on the Gravy end of things and live a very comfortable retirement .

The most common problem that we have seen with others that have failed with income properties , is that they spend any/most of any of the postive cash flow each month , instead of banking away a good maintenance fund , and paying down the mortgage as fast as they can .

This is not an overnight business , one is in it for the long haul

But done right ...it's a good thing
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Old 08-12-2018, 08:11 PM
Weedy1 Weedy1 is offline
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Duplex across the street from an elementary school.
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Old 08-12-2018, 08:26 PM
1shotwade 1shotwade is offline
 
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Quote:
Originally Posted by MooseRiverTrapper View Post
Invermere/Kelowna vacation condo with view of the the lake. Fully furnished. For 350k. If you get lucky and rent in the winter it’s a real money maker.
Have properties in both and houses with space for boat and rv's are where you make money.
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Old 08-12-2018, 08:51 PM
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sewerrat sewerrat is offline
 
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Last year we bought a rental property it is a newer bungalow, we have a property management company looking after it so no headache for us let the management people deal with it ,as long as I get my money.

I would never buy a condo and rent it out, I don't think you make much per month as the rent income has to cover taxes, condo fees, insurance and many rules as per condo board.
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Old 08-12-2018, 09:09 PM
R3illy R3illy is offline
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where are you thinking about buying?? This would play a major role in the decision first.

Edmontons relaxing rules to the secondary suites at the moment.

If i were to add to my rental properties it would be a house with 2 suites.
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Old 08-12-2018, 09:43 PM
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Trochu Trochu is offline
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I've owned all four, and given the choice, I'd prefer:

-Commercial building;
-Commercial condo;
-House; and,
-Residential condo.

Really depends on your situation, what your expectations are, what you intend to put into it, how much cash you have, etc. My dad had an aquantence who had 20+ single family homes in Red Deer. My real estate agent has residential but is wanting to get into commercial as he's getting tired of getting calls that a light bulb is burnt out.
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Old 08-13-2018, 08:41 AM
bucksman bucksman is offline
 
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Quote:
Originally Posted by targetrick View Post
whichever way you go, condos or houses, get a rental agent!!!

I'm not a rental agent, nor am i in any way related to any. Me, i'm a unit owner in a condo building. You'll find that when renting, you will meet some good renters, but you will more than likely meet more of the least outstanding people in the world. I know - i tend to see them in action every day.

The rental agent will yes, cost you some income as they screen and sometimes boot renters. I'd wager the cost of the rental agent is worth way, way more than the agro of personal dealing with renters. Kind of similar to how the added cost of good ammo tends to be be really, really small compared to the overall good shooting you get.

Funny but true story: Some decades ago my brother-in-law was in a rental property club with a bunch of other guys. In those pre-debit days, rent was personally collected each month. One day he was a day late to collect rent, and the renters told him, "oh, you were late about the rent so we spent all the money on beer."

one funny but good argument for getting a rental agent.


this
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Old 08-13-2018, 09:32 AM
Big Grey Wolf Big Grey Wolf is offline
 
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Single family bungalow the best property next to commercial building. When economy goes in tank as it regularily does in Alberta they are last to be vacated. Also have better chance of getting family that do not party all the time. Property management firm great, except they will consume all the profit from your building. If you want to make money need to manage building yourself.
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Old 08-13-2018, 09:42 AM
ceadog ceadog is offline
 
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I spend my days selling apartment buildings and spent most of my younger years helping managing houses, condos, commercial and instutional properties. I think investment real estate is a accessable and efficient way to build wealth, however if you screw the pooch, you can bankrupt yourself. That said, I know folks who have been bankrupt a couple times but are still happy, healthy and generally good business people.

I wrote a book about apartment buildings if that's something you're into. If you're thinking residential then I think Don Campbell's Real Estate Investing in Canada 2.0 is awesome. And I generally stay away from condos - in my experience it's almost impossible to see a special assessment that's 3+ years out and I've paid tens of thousands in special assessments.
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  #17  
Old 08-13-2018, 11:06 AM
srs123 srs123 is offline
 
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Thanks for all the responses. I was thinking apartments, but now I may as well try and save up a bit more and go for a house with a basement suite.
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  #18  
Old 08-13-2018, 11:08 AM
srs123 srs123 is offline
 
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Quote:
Originally Posted by MooseRiverTrapper View Post
Invermere/Kelowna vacation condo with view of the the lake. Fully furnished. For 350k. If you get lucky and rent in the winter it’s a real money maker.
I have always been interested in a place there but how does a person go about renting those of living in Calgary??. Wouldnt it be short term (lodge like) rentals around ski season only??
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Old 08-13-2018, 11:17 AM
Sneeze Sneeze is offline
 
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Some Alberta markets it is completely impractical to own income properties on small scale.

My suggestion is do a seriously honest study at the return after tax on the investment. Fixing overflowing toilets at 1:00am is a seriously bad investment at a 6% levered return. At 12% I will fix them day and night with my bare hands.


Folks often forget the impact of taxes from these properties as well. There is no super deduction. Principal can't be written off, capex is ammortized and you are going to pay.
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Old 08-13-2018, 11:41 AM
I_forget I_forget is offline
 
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Quote:
Originally Posted by Sneeze View Post
Some Alberta markets it is completely impractical to own income properties on small scale.

My suggestion is do a seriously honest study at the return after tax on the investment. Fixing overflowing toilets at 1:00am is a seriously bad investment at a 6% levered return. At 12% I will fix them day and night with my bare hands.


Folks often forget the impact of taxes from these properties as well. There is no super deduction. Principal can't be written off, capex is ammortized and you are going to pay.
You just need to be smart about it Make sure you’re agreement says tenant replaces burnt light bulbs and plunges clogged toilets.
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Old 08-13-2018, 11:42 AM
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Trochu Trochu is offline
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Keep in mind as well srs123, that some of the call outs can be charged back to the tenet depending on how the contract is set up. If buddy calls you at 1:00 AM to fix an overflowing toilet, and its because their kid flushed a toy truck earlier in the day, you can charge that back to them. If it's because of a broken pipe or root, you are eating that cost. To my earlier post, buddy's light didn't work. The landlord came and took a look, changed the light bulb, and charged them I believe $35.00 for a service call.
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Old 08-13-2018, 11:44 AM
Sledin Sledin is offline
 
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My advise is read 'real estate investing in Canada' by Don Campbell.
He has a system, it's not sexy, it works again and again.
My best friend does real estate investing with his brother in law, they do it full time and hire extra help (me) when they need it. So I see them still learning, you have to find what works and repeat.
My friend built two duplexes with garages in a small town hoping to get seniors, no seniors. He built a two story six plex and four tenants are seniors. Another six plex is being built.
Maybe your target tenant is a professional, but higher maintenance, or low income but easy to deal with.




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  #23  
Old 08-13-2018, 01:39 PM
big zeke big zeke is offline
 
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Default Bit off topic

A fella I used to work with had a neat suggestion, well suited for younger couples...buy a 4 plex, live in one unit and rent out the other 3. You can keep an eye on the place & tenants, call in help for repairs that are above your skills, slightly more work than maintaining your own home. You may need a higher down-payment but it would be rare that your rental income won't cover the expenses.

I know folks that used property managers, this convenience ate up the monthly profits so they only gained on property value (and resulting Capital Gains tax).

Might suggest that to my kids when they get to that age.
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Old 08-13-2018, 05:45 PM
MyAlberta MyAlberta is offline
 
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whats your comfort level and how much sweat are you willing to put in? The purchase of any property should begin with the end game plan, is it sellable? Don’t err at this step. Your purchase should be one that has inherent value. Don’t count on future value, unless the investment includes some type of added value. A fixer upper for instance, or a suite addition. Research the rental and vacancy rates for any type of property, as well as the purchase price and associated expenses. Create cash flow scenarios using your available options. Consider tenant demigraphics. Any of the aforementioned property types could fulfil, if the numbers crunch out.

Don’t overlook your current residence. If you own it, you’ve passed the difficult first step. Suite it out if possible to begin your cash flow.

If you purchase a fixerupper, time is of the essence. It needs to generate revenue ASAP.

Research tenancy agreements. The basic serves, but it is astute to add language that protects your investment and time.

I think it’s an excellent time to be knocking on doors. Beat the Realtor to the sale. One of the best ways to secure that ‘up front’ value.
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Old 08-13-2018, 05:54 PM
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pikergolf pikergolf is online now
 
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There is another way to get into rental with less outlay.
https://money.usnews.com/investing/s...-on-the-market
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  #26  
Old 08-13-2018, 06:03 PM
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Ken07AOVette Ken07AOVette is offline
 
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After over 30 years of doing what I do, if I was given brand new rental properties for free I would raze them and put in free trout dugouts.
You can't ask questions.
You have no recourse.
If they kill themselves there is no insurance.
The rentalsman act protects the tenant.
Everyone lies.
Think about it- generally a 'family' ages 20-45 where the parents are not both the kid's parents, living in a car, no assets, looking for fully furnished home and 'just moved here for a new job but don't want to screw up the chance of getting it by having you call them.....' and any of 1000 other stories that I have heard countless times.

I have talked to no less than a dozen Landlords from this board alone, asking how to evict, cover loss, recover costs, seize belongings, effect actions....

I heavily recommend doing renovations on cheap houses and reselling over renting.
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Originally Posted by Twisted Canuck
I wasn't thinking far enough ahead for an outcome, I was ranting. By definition, a rant doesn't imply much forethought.....
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  #27  
Old 08-13-2018, 07:15 PM
tranq78 tranq78 is offline
 
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Quote:
Originally Posted by Ken07AOVette View Post
After over 30 years of doing what I do, if I was given brand new rental properties for free I would raze them and put in free trout dugouts.
You can't ask questions.
You have no recourse.
If they kill themselves there is no insurance.
The rentalsman act protects the tenant.
Everyone lies.
Think about it- generally a 'family' ages 20-45 where the parents are not both the kid's parents, living in a car, no assets, looking for fully furnished home and 'just moved here for a new job but don't want to screw up the chance of getting it by having you call them.....' and any of 1000 other stories that I have heard countless times.

I have talked to no less than a dozen Landlords from this board alone, asking how to evict, cover loss, recover costs, seize belongings, effect actions....

I heavily recommend doing renovations on cheap houses and reselling over renting.
Correct! Been there, done that, got the tee shirt.

Plus the new pot laws means your tenant can turn the place into a grow-op and they don't even need to tell you. 4 plants, no size limit. My bet is a landlord condition or covenant won't protect you.

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  #28  
Old 08-13-2018, 07:33 PM
jstubbs jstubbs is offline
 
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Quote:
Originally Posted by Ken07AOVette View Post
The rentalsman act protects the tenant. .
This right here is one big obstacle in being a residential landlord. The Residential Tenancy Act is one strong piece of legislation that doesn't provide the landlord much but the tenant a lot.

One of the better reasons that commercial can be the better way to go with a good contract lawyer.
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  #29  
Old 08-16-2018, 03:24 PM
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Ken07AOVette Ken07AOVette is offline
 
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just a side note, I got 3 new accounts this morning, guess what all 3 of them are.

I hate residential tenant accounts. Nobody confirms employment, calls references or for the most part has a legal contract.

Run from this deal.
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Originally Posted by Twisted Canuck
I wasn't thinking far enough ahead for an outcome, I was ranting. By definition, a rant doesn't imply much forethought.....
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