Need assistance making the right decision

[Pssawhney]

Hi everyone,

I am new to the site and new to real estate investing, yet love the information on the site and the input. I have been considering focusing on real estate as a business and considering purchasing a student rental in the KW or possibly just a regular bungalow with basement finished to rent out. I am still reading and doing my homework on which is best and that best suits us.

My dilemma is we were considering selling our home in Brampton and using our equity to purchase one or two properties as we have a little over 200k in equity in the house or do we go the route of refinancing and use the mortgage to purchase towards the new project.

Second, I have a condo in downtown Toronto and possession is due at the end of the year. Do I consider assigning the condo for a potential profit of approx 150k (purchased for 550k and potential sell is around 699k less realtor fees) or do I close the property and pay the closing fees and rent it out and try and refinance this property and use the funds to also invest in a new project. The unit should rent for around $2500/month and will carry with minimal cash flow (%20 down with utilities of 550 and taxes of 435).

Any suggestions would be greatly appreciated.

 

[Thomas Beyer]

Real estate with less than $1M cash is not a full time business but a nice networth enhancer.

Consider land transfer taxes in Toronto.

If you can make 150,000 flipping paper then you should certainly consider that, but keeping then refinancing a year or six months in is an option.

Nothing like learning in the real harsh cold world.

I finished my book with these words: And now, after reading this swimming manual go get wet as that is the only way to learn how to swim.

 

[Matt Crowley]

What do you mean by "focusing on real estate as a business" ? Usually this means guys want to focus on being an investor full time. It is a pretty bad idea. You need to consider that properties, pretty much across Canada, yield 4 - 6% per year. Management fees on two properties will be in the neighbourhood of $5000 per year. So basically, the idea on the table is whether it is a good idea to focus full-time on a business that grosses $5000 per year. I'll let you answer whether that is a good idea. Now of course there is the possibility that property values can go gangbangers and go up by 10%. Keep in mind there is no rule that property values or rents will always go up. Remember that the biggest players in real estate use 70% or less debt. As a rule real estate investing is a place you put a big pile of money for a long time because you want it to be there in the future. Real estate is cyclical and you need a small enough mortgage that you can get through slower parts of the cycle and continue to maintain your properties.

If you want to focus on real estate as a business there are a few obvious options:
- Realtor, appraiser, mortgage broker, commercial broker, real estate lawyer, investment analyst, property manager, property inspector
- The benefit with above career choices is that you will be closely involved in the market and be paid while you learn it

Get-rich-quick careers that eventually bust:
- full time investor in single family homes
- going to become full time investor with $100,000

Folks in the second category that claim buying single family homes is their full time career are usually from a couple groups of people:
- Unscrupulous hustlers
- Information marketers pretending to invest in single family homes full time but whose actual career is selling products on stage or some other product you buy in a binder

Usually the observation of someone being a really successful real estate investor because they bought a bunch of doors is just a cart before the horse problem. All you need to buy a bunch of houses is have a bunch of cash. That is it. So, someone who is a successful lawyer, doctor, or has an uneducated flow of investor capital can grow a large number of doors. It has nothing to do with whether they are a successful investor. Buying houses is so simple. It really is. The more money you put down, the less stress you have.

There is a saying that if you want to make a small fortune in real estate start with a large fortune. I'm not trying to be coy it is just there is no reason that real estate is a better avenue to make a lot money than being a baker, insurance broker, or car salesman.

That being said, I think the best way is through development and building. Just look at your own community at how small, local guys have been able to make a lot of money in real estate...get away from anything that looks or smells like get rich quick. The most successful guys I know started out as builders and used that to generate capital. Some ended up becoming developers and got involved in larger scale projects. Sometimes guys start out as lawyers, realtors, or brokers and get into development later. But the guys who become successful are not the hustlers pitching "lipstick on a pig". They are going through city council, achieving approval, and building something with great community value.

Be wary of anyone who is only concerned about doing a deal or getting rich. These guys are putting together garbage. Total jokers. Real estate and rental housing is a business where a quality product should be the basic tenant of business. If you see an organization that is more concerned with me getting rich than client care and product quality, you are with the wrong group. It takes time and expertise to learn how to make money and provide an excellent quality product.

 

[housingrental]

Great posts above.
I would keep the house and sell the condo.