New home owner and investment advice

bmackay11

New Forum Member
Registered
Jun 11, 2018
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#1
Hi all,

I'm looking for some advice.. and really some mentorship in this path I've started to take recently. I have inherited a home in Vancouver (valued roughly at 1.4 million) which is mortgage free. I'm currently having it rented out and looking to take a HELOC out to purchase my next property - I'm looking at townhomes in Vancouver to start my family. I'm hoping to get some solid advice on what to do next.. how much equity to take out of the existing property to put into the next purchase, HELOC interest rates (variable/fixed? what is considered a good rate) and really how to grow my real estate portfolio into the future using this as leverage.

I've considered joining REIN and I'm hoping to network and sponge as much advice as I can from all of you who have had success in RE investing. Look forward to speaking with some of you regarding my situation. Appreciate your help and comments.
 

Martin1968

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Jan 22, 2017
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#2
Congrats! Having a good net worth is very helpful. I’m sure you will get lots of good advice (and possibly some bad) but assuming you also have a working income you would not need to take out a heloc to purchase a primary residence. You should be able to qualify for a conventional mtg, and you should, as it’s cheaper then a heloc. You could place a small heloc on the inherited property as a back up plan but do that after your first purchase. Don’t go overboard. You are off to a great start with what’s been given to you.
 

Matt Crowley

Senior Forum Member
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Dec 14, 2013
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Calgary
#3
HELOC: usually 1 - 2% above prime so may be pushing 5%.

On the inherited home, what is your forecast free and clear return per year? (total income / property cost)? What do you expect for annual appreciation?
 

bmackay11

New Forum Member
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Jun 11, 2018
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#4
Rental income being generated is about $4200/mo . After all my expenses I'm still pulling in over $3500 a month. Unsure of annual appreciation but its located in one of the top 5 desirable neighborhoods in Vancouver. Anywhere i can look up that statistic?
 

Matt Crowley

Senior Forum Member
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Dec 14, 2013
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Calgary
#5
Unfortunately, Realtors are still the only source of that information. City-wide index available on Teranet.

The yield on the property is 3.00% per year - before vacancy or cyclical maintenance requirements (3500x12 / 1,400,000). If you take your annual compounded appreciation expectation, that is the total return you should expect on the investment per year. Long term I'd suggest something around 3.5% to 5.5% would be the total return per year. (From your monthly expense numbers, it looks to me like you are managing yourself, which is a real cost and I would suggest should be considered in the analysis)

Really key considerations:
1) Payment of tax on the gift? (Is the gift after all taxes)
2) What % of your net worth is invested in real estate estate in Vancouver? Are you comfortable having the real estate market value tied to job prospects and economic growth in the same city? What if both are down at the same time?
 
Likes: CorySperle

bmackay11

New Forum Member
Registered
Jun 11, 2018
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#7
Thank you all for the comments. I'm going to study as much material i can on the forum and the links Thomas has provided.. I have a ton to learn, grow and experience.
 

CorySperle

Senior Forum Member
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Sep 1, 2010
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#10
Very good situation to be starting from, and many options for you but some great advice out there especially on being conservative and educating yourself extensively. You always want to consider your highest and best use of the capital you have available. Assuming you have 1.4M at your disposal, here is what I would do in your position:

- sell the property immediately depending on tax implications
- put the money in the bank and earn a modest 5% return, rent, and take about a year to get up to speed on RE
- when your ready to buy go direct to commercial, as you have the ability to do so. Most others have to build up their single family portfolio, sell them off, then go commercial.

In perspective, compare the 1.4M house in Vancouver to what you could buy in Edmonton. You could get a 40 suite apartment building for example, or other fantastic commercial asset.
 

ThomasBeyer

Senior Forum Member
REIN Member
#11
Very good situation to be starting from, and many options for you but some great advice out there especially on being conservative and educating yourself extensively. You always want to consider your highest and best use of the capital you have available. Assuming you have 1.4M at your disposal, here is what I would do in your position:

- sell the property immediately depending on tax implications
- put the money in the bank and earn a modest 5% return, rent, and take about a year to get up to speed on RE
- when your ready to buy go direct to commercial, as you have the ability to do so. Most others have to build up their single family portfolio, sell them off, then go commercial.

In perspective, compare the 1.4M house in Vancouver to what you could buy in Edmonton. You could get a 40 suite apartment building for example, or other fantastic commercial asset.
Indeed commercial is more lucrative than SFHs !! With $1.4M you can buy $5M of assets, say a 40 unit building or mobile home park or industrial warehouse or small office building. What’s the goal though ? Cash-Flow or Maximum ROI ? Analyzed here with a hypothetical $1M http://myreinspace.com/threads/what-is-better-cash-flow-or-higher-roi.26596/


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com