A newer rental vs. reno house

[TiffanyS]

Hi there,



Need help with this one...



We live in Calgary and currently own a house in Sage Hill as well as a rental in Beddington (half duplex, rent upper and lower suites). Looking to expand on our properties and not sure which direction to go.

Possibility of buying another rental in the NW that we can rent out immediately, or the other option is buying an older place more inner city that needs gutting/renovating, doing this work, and then selling for more $$ when the markets are in our favour.

Overall long term goal is to learn more about the market and obtain many more properties whether for rental or buying/selling purposes. We are very new to real estate investing and looking for some advice

Thanks!

Tiffany

 

[DaveL]

Hi Tiffany,



I don't know if there is really a right or wrong way for you to go. It would really depend on you and how much money and time you have. I have reno'd 3 houses this year and it is definately rewarding. Since it sounds like this will be your first time doing this, you will have to spend a lot of time deciding on cabinets, tile, carpet, laminate, colour of counter top, hardware, etc... Is this something you will be doing yourselves or will you hire someone to do this?



If you decide to go the reno route I would talk to your broker about doing a purchase plus improvements. In my experience MCAP offers the most money at 25K the majority seem to come in at around 20K.



Another great strategy is to use a LOC to purchase the entire property. Complete all your reno's and then go get a mortgage on the new appraised value and pay back the LOC. You'll end up with a great place with less money in. While this works great you need to have access to a large LOC or cash.



Good Luck!

Dave

 

[TiffanyS]

Thank you for the advice Dave!



And to answer your question, I will not be doing the reno's myself. My boyfriend, who I am buying the house with, is a site super for a home building company...so this will give us good access to trades for any work he is unable to do himself



Tiffany

 

[Thomas Beyer]

[quote user=TiffanyS]buying an older place more inner city that needs gutting/renovating, doing this work, and then selling for more $$ when the markets are in our favour.


You usually make far more money in an old home that is being renovated than renting an existing place, BUT: it is an entirely different business !



Ask yourself: are you in the beef business .. or in the milk business ? Then look for an appropriate cow.



Nothing wrong with either, but one is fast+quick+more work .. and the other is less work but more ongoing income.



The beef cow needs to be made fat quickly, then sold. This takes usually more cash at hand, some skills in risk management, cost containment and staging/marketing. It can be very profitable, per $ invested, with the right skill and cow selection ! It is slightly more risky than the milk cow business, but possibly more profitable, quicker.



I couldn't decide .. so I decided to be in both, more milk cow business lately.

 

[wgraham]

This is a question many investors ask themselves.



As Thomas stated....know what business you want to be in.



The majority of my transactions are buy and hold rentals. This doesn't mean I don't do flips or rent to owns or any other strategy but I definitely am much more competent at my primary niche.



In my opinion flips have a lot more risk, especially for the new investor. Buy and holds have more knowns and this message board is very good at showing you the land minds. Flips get out of control quickly so you have to have a large spread to make sure you are not underwater at the end of the project.



If I were in your shoes I would take the less risky road until I had travelled a few miles