Milton=Positive Cash Flow

[afshinrein]

Hello,

Last month I purchased 3 properties for my investors and I rented them for positive cash flow within two weeks. The fact is that the properties are fairly inexpensive and with a 35 years amortization and variable rate mortgage my investors are making $50 to $250 cash flow. I know we had city of Milton over to our REIN meeting but I could not believe this much of potential just around the corner.

 

[housingrental]

Hi Afshin

This seems like an odd topic to post. Why did you decide to write this post?

What do you think will happen to those investors in 2 years when their $50 positive cash flow currently if variable rate mortgages double? Isn`t the most likely scenario most people currently investing in Milton will be cash flow negative?

 

[afshinrein]

QUOTE (housingrental @ Jul 25 2010, 06:33 PM) Hi Afshin

This seems like an odd topic to post. Why did you decide to write this post?

What do you think will happen to those investors in 2 years when their $50 positive cash flow currently if variable rate mortgages double? Isn`t the most likely scenario most people currently investing in Milton will be cash flow negative?
Hi,

In 2 years, watching the appretiation in Milton, they will harvest a good 5%/year return and 2 things could happen:
1) negative $50 compares to 5% appreciation is negligable,
2) If they panic for $50/month then they can sell their house
Also, the minor negative cash flow on 1 or 2 properties is not back breaking and a usable point for income tax report at the end of the year.
Don`t forget that within 2 years the rent is also higher.

Afshin

 

[bizaro86]

QUOTE (afshinrein @ Jul 25 2010, 09:37 PM) minor negative cash flow on 1 or 2 properties is not back breaking

Taking negative cashflow on those 1 or 2 properties will reduce an investors actually cash available for invetment (due to paying the negative cashflow) but more importantly than that it will impact the TDS, making it more and more difficult to qualify for mortgages for new properties. That makes negative cashflow a portfolio limiting move.

Michael

 

[afshinrein]

QUOTE (bizaro86 @ Jul 26 2010, 07:37 AM) Taking negative cashflow on those 1 or 2 properties will reduce an investors actually cash available for invetment (due to paying the negative cashflow) but more importantly than that it will impact the TDS, making it more and more difficult to qualify for mortgages for new properties. That makes negative cashflow a portfolio limiting move.

Michael

So far we have positive cash flow and if the market stays the same we should be good.

Thanks

 

[housingrental]

Thank you for your response Afshin
You ignored the first half of my post - Why was this topic posted? Or atleast in this section?

Isn`t what your suggesting go against what most investors look for, and what REIN teaches?
How do you know that in two years from now the properties will have apprecaited 5%?
Won`t investors loose money if needing to sell in two years after transaction costs even if it appreciates 5%?
So either sell and lose money on your investment or continue to operate and burn through cash each month?

As noted by an above poster won`t this harm there ability to purchase additional investment properties?

If you anticipate future higher interest rates, and stress test the purchases you have mentioned as REIN recommends, would they still be cash flow positive with 5.5% interest rates and 25 year ammortizations?

This seems improbable if these properties only cash flow $50-$250 / month currently with current variable interest rates available unles they were purchased with >50% down payment or had small purchase prices... which you don`t normally see in Milton...

QUOTE (afshinrein @ Jul 25 2010, 11:37 PM) Hi,

In 2 years, watching the appretiation in Milton, they will harvest a good 5%/year return and 2 things could happen:
1) negative $50 compares to 5% appreciation is negligable,
2) If they panic for $50/month then they can sell their house
Also, the minor negative cash flow on 1 or 2 properties is not back breaking and a usable point for income tax report at the end of the year.
Don`t forget that within 2 years the rent is also higher.

Afshin

 

[housingrental]

Also re " Don`t forget that within 2 years the rent is also higher. "
This doesn`t mean much...
Will expenses not move up at all in 2 years?
What reason do you have to believe that increases in rent will materially outpace increases in expenses in the next two years?
In Ontario over the last two years most investors have seen property tax, utilities, etc.. rise higher than 5% and rental rate increases have lagged this... and as of last month from the HST expenses have increased again with a less than 1% rent increase possible for next year for most investors.... correct?

What towns and property types have you been investing in where this hasn`t been the case in Ontario?

 

[Thomas Beyer]

QUOTE (afshinrein @ Jul 25 2010, 08:37 PM) Don`t forget that within 2 years the rent is also higher.
yeah .. may be by 2% in Ontario ..

Likely you are too levered if cash flow is this low with a 35 year amortized mortgage at prime !!!

Or: the rent to price ratio doesn`t make sense. Why not share some details on price of home and its rent & expenses ?

Prices in 2 years may or may not be higher in Ontario. That depends on supply/demand, the economy and interest rates. They may be lower. Or flat.

Anyone who bases real estate investments on a 2 year outlook is either uninformed, a rogue investor or a fool.

 

[bizaro86]

QUOTE (afshinrein @ Jul 26 2010, 08:42 AM) So far we have positive cash flow and if the market stays the same we should be good.

Thanks

I`m glad to hear it. Personally, I have no idea where Milton is, but I`m glad to hear your investments are working for you. My response was to your second post, where you went into some reasons why negative cashflow is ok. I disagree with that, so I responded. If you have positive cashflow (or breakeven), obviously the situation is different.

Michael

 

[Rickson9]

QUOTE (bizaro86 @ Jul 26 2010, 12:17 PM) I`m glad to hear it. Personally, I have no idea where Milton is, but I`m glad to hear your investments are working for you.

Generally, going from east to west - Toronto, Etobicoke, Mississauga, Milton.

 

[bizaro86]

QUOTE (Rickson9 @ Jul 26 2010, 10:30 AM) Generally, going from east to west - Toronto, Etobicoke, Mississauga, Milton.

Thanks! I learn something new every day. (Although very rarely is it the geography of Southern Ontario.)

Michael

 

[housedoc]

QUOTE (ThomasBeyer @ Jul 26 2010, 11:31 AM) Anyone who bases real estate investments on a 2 year outlook is either uninformed, a rogue investor or a fool.
Or a realtor.

Maybe his timeline is compressed because he knows that those prefabricated, sawdust and glue, cancerous structures will begin deteriorating sooner than a real house.

 

[Rickson9]

QUOTE (ThomasBeyer @ Jul 26 2010, 11:31 AM) Anyone who bases real estate investments on a 2 year outlook is either uninformed, a rogue investor or a fool.

For readers who join late, just a quick note that the OP never mentioned a 2 year outlook.

With regards to the individuals who responded to the OP: why so much discouragement? What is the objective of your response exactly?

 

[Thomas Beyer]

QUOTE (Rickson9 @ Jul 27 2010, 08:50 AM) For readers who join late, just a quick note that the OP never mentioned a 2 year outlook.
he stated this:

Hi,

In 2 years, watching the appretiation in Milton, they will harvest a good 5%/year return and 2 things could happen:
1) negative $50 compares to 5% appreciation is negligable,
2) If they panic for $50/month then they can sell their house
Also, the minor negative cash flow on 1 or 2 properties is not back breaking and a usable point for income tax report at the end of the year.
Don`t forget that within 2 years the rent is also higher.

Afshin

sounds like a 2 year view to me ..

 

[bizaro86]

QUOTE (Rickson9 @ Jul 27 2010, 09:50 AM) For readers who join late, just a quick note that the OP never mentioned a 2 year outlook.

With regards to the individuals who responded to the OP: why so much discouragement? What is the objective of your response exactly?

I certainly never intended to be discouraging, I was responding to the bit about 50/month negative cashflow being ok, which I disagree with.

I thought the comment about cancerous new construction was a bit much.

Michael

 

[housingrental]

EDITED TO MINIMIZE NEGATIVITY
Hi Rickson
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To directly answer your question - which should be easy to discern if reading my posts above:

a) This is a REIN forum and the OP is advocating an investment startegy that goes against REIN principles.
b) I don`t like to see people be harmed... The strategy he`s advocating can hurt people from:
Burning through cash each months on operations
Making it more difficult to qualify for future investment properties
It`ll likely be inexperienced investors who`xxxxxxxxxxxxxxxx - And after having poor results from their purchases get discouraged from investing in real estate - which can be very profitable if done right with a long term view


And of course not to be forgotten:

c) OP is a Realtor who`s motivation in posting what he has is to generate leads for himself - while advocating purchases that xxxxxxxxxxxxxxxx xxxxxxxxxx term interests - He didn`t post any helpful information that could allow investors to invest in Milton... No meaningful content whatsoever - Ie This was a deceptive post that functions as a classified advertisement for his own interests - The only place for this is in the classified section.

The forum has many helpful regular contributors that are service providers. They refrain from starting topics to advertise themselves inappropriately and instead concentrate on helping others. Would it be desirable if all of them starting posting topics like this one? Would this forum be of much use to anyone if so?

QUOTE (Rickson9 @ Jul 27 2010, 11:50 AM) For readers who join late, just a quick note that the OP never mentioned a 2 year outlook.

With regards to the individuals who responded to the OP: why so much discouragement? What is the objective of your response exactly?

 

[Thomas Beyer]

QUOTE (housingrental @ Jul 27 2010, 09:57 AM) .... No meaningful content whatsoever - Ie This was a deceptive post that functions as a classified advertisement for his own interests - The only place for this is in the classified section.
..
indeed !

 

[Rickson9]

QUOTE (ThomasBeyer @ Jul 27 2010, 11:57 AM) he stated this:

Hi,

In 2 years, watching the appretiation in Milton, they will harvest a good 5%/year return and 2 things could happen:
1) negative $50 compares to 5% appreciation is negligable,
2) If they panic for $50/month then they can sell their house
Also, the minor negative cash flow on 1 or 2 properties is not back breaking and a usable point for income tax report at the end of the year.
Don`t forget that within 2 years the rent is also higher.

Afshin

sounds like a 2 year view to me ..

After he was asked the speculative question of...

"What do you think will happen to those investors in 2 years when their $50 positive cash flow currently if variable rate mortgages double?"

It just seemed like he addressed the timeframe of the question.

 

[Rickson9]

QUOTE (housingrental @ Jul 27 2010, 12:57 PM) Hi Rickson
Please re-read his posts - Thomas also quoted in the response below yours - He absolutely did in his response...
I take it a swipe at me as you didn`t appreciate my past posts on you that you had stopped responding to?
To driectly answer your question - which should be easy to discern if reading my posts above:

a) This is a REIN forum and the OP is advocating an investment startey that goes against REIN principles.
b) I don`t like to see people be harmed... The strategy he`s advocating can hurt people from:
Burning through cash each months on operations
Making it more difficult to qualify for future investment properties
It`ll likely be inexpereinced investors who`d fall for taking his advice - And after having poor results from their purchases get discouraged from investing in real estate - which can be very profitiable if done right with a long term view


And ofcourse not to be forgotten:

c) OP is a realtor who`s motivation in posting what he has is to generate leads for himself - while advocating purchases that can harm his clients long term interests - He didn`t post any helpful information that could allow investors to invest in Milton... No meaningful content whatsoever - Ie This was a deceptive post that functions as a classified advertisement for his own interests - The only place for this is in the classified section.

The forum has many helpful regular contributors that are service providers. They refrain from starting topics to advertise themself innappropiately and instead concerntrate on helping others. Would it be desireable if all of them starting posting topics like this one? Would this forum be of much use to anyone if so?

Ok I understand now. It is definately good that advertisements are discouraged. In this case, this thread should be moved.

 

[housingrental]

Thanks Rickson