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Quickest Way To Passive Income: Rents vs Flipping?

Discussion in 'Real Estate Discussion' started by Geoffrey, Apr 16, 2017.

  1. Geoffrey
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    Geoffrey Member Registered

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    Many of us, myself included, have the goal of passive income. However, few residential properties positive cashflow without a major downpayment of 50% or more, at least on Vancouver Island. To raise that 50% for a bucket list of properties, I am considering other options, even the "flipping" method of buying condos and selling them after a year. What are people's thoughts about this strategy?

    A major concern has to be capital gains. Are there ways to minimize this?
    And are there ways to sell prior to mortgaging the property, such as with a new start?
     
  2. ThomasBeyer
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    ThomasBeyer Well-Known Member REIN Member

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    Flipping houses or condos is not passive income. The flipping party works well until it doesn't anymore.
     
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  3. Geoffrey
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    Geoffrey Member Registered

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    I know. I'm really not a fan of the strategy or the mindset. But even 3-5 years of appreciation can be hard to predict, as we have seen with Alberta lately. And at a certain point, you've got to convert good appreciation to cashflow, right?
     
  4. ThomasBeyer
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    ThomasBeyer Well-Known Member REIN Member

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    That is indeed the great debate: what is better ? Higher risk presales into a rising market or boring lower risk cash flow that works even in slightly falling markets.
     
  5. Willyboy
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    Willyboy Member Registered

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    There's no cash flow in Canada anymore. Properties are over inflated in price in most major Canadian cities with some cities being over inflated by as much as 200 to 300% and even more like Toronto and Vancouver. Whatever you do there are two main things you have to take into consideration. You have to wait a very long time like 10 years and over and possibly up to 20 to 25 years and you should have enough cash to cover for expenses until you get some price appreciation again. Unfortunately all the new home buyers who are entering the market now are going to suffer for a very long period of time.
     
  6. Geoffrey
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    Geoffrey Member Registered

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    I dunno. I just bought in Victoria in a very hot market and positive cash flow over $1000/month right away with 20% down. It can be done.
     
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  7. Geoffrey
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    Geoffrey Member Registered

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    Thomas, I see your book on amazon. I will order a copy. Thanks.
     
  8. colinaforrest
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    colinaforrest Performance Investing with Integrity Registered

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    They are wonderful reads!
     
  9. CorySperle
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    CorySperle Active Member REIN Member

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    Buy as many properties as you can and after 5years sell off the poor performers and pay off the good ones. Then cash flow
     
  10. ThomasBeyer
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    ThomasBeyer Well-Known Member REIN Member

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    Such wise words, Cory.

    Make it ten. Or 20, depending on age.
     
  11. CorySperle
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    CorySperle Active Member REIN Member

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    Yes it makes much sense now for sure. Wish I had started 20 years earlier.
     
  12. Sam53473
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    Sam53473 Member REIN Member

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    I would love to buy 20 but the challenge is getting approved for residential mortgages. I have 3 in the lower mainland and already fear getting turned down for my next purchase from the bank and that is with an over $200,000 per year income. No idea how to get over that hurdle without getting into commercial real estate?
     
  13. Willyboy
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    Willyboy Member Registered

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    That makes perfect sense.
     
  14. Brad3375
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    Brad3375 Brad Redekopp Registered

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    Your investing in the wrong market
     
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  15. Sherilynn
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    Sherilynn Well-Known Member REIN Member

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    This is completely untrue. Yes, if you buy in a hot market you likely won't get cashflow and could see the property value decline below your purchase price when the market cools. But why buy in a hot market?

    There are many cities in Canada where properties are affordable and yet they cashflow. Furthermore, if the cashflow isn't what you'd like it to be, there could be ways to dramatically increase it, such as adding a legal secondary suite.

    Finally, for people who want to invest in real estate but don't know how or where, there are many Real Estate Investing Experts (myself included) who are always seeking Joint Venture partners for projects. Enjoy the benefits of real estate investing without the hassles. :)
     
  16. Sherilynn
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    Sherilynn Well-Known Member REIN Member

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    Yes and no. It depends whether your goal is to replace your job income or to fund a comfortable retirement.

    Strong cashflow is necessary to maintain the investment, including enduring downturns as well as upgrading the property. But most investors don't bank on pocketing cashflow for quite some time. A bit of sacrifice now could pay huge returns later. (I use most of my excess cashflow to fund down payments for more properties.)

    I've found one of the best ways to capitalize on appreciation is to have mortgages with automatically increasing HELOC's built in. This way, once your equity reaches a certain point, you may withdraw equity without refinancing, and those funds can be used for reno's or down payments.
     
  17. adriano
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    adriano Active Member REIN Member

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    Buy as many as you can and hold. Like Thomas has always said " if you hold long enough it will always go up" and of course at that point refinance and pull money out and repeat. This will make you a lot of money.
    I wish I would have started earlier also
     
  18. Sam53473
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    Sam53473 Member REIN Member

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    Is someone able to share the magic secret of being able to qualify for as many mortgages as you possibly can? I've only been in the business for a few years; have 3 properties and a healthy, stable career/income yet I see big road blocks in my near future for qualifying for residential mortgages despite having the down payment for more... perhaps I am dealing with the wrong mortgage broker .
     
  19. ThomasBeyer
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    ThomasBeyer Well-Known Member REIN Member

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    At some point you will hit " the wall " and you have to convert single units to a commercial approach with cross-collaterized mortgage with a DCR or 1.2 or 1.25, usually lowering your LTV dramatically.

    Then best, or better, to switch to commercial or multi-family assets as the asset qualifies and not you.
     
  20. Sam53473
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    Sam53473 Member REIN Member

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    Thank you Thomas, I thought I was missing something with all the comments about buying as many as possible. I would love to stay with single family and townhouses but the wall is already looming so I suppose I will need to learn new tricks in the near future.

    Any recommendations for good mortgage brokers for this type of transition. (small residential portfolio to commercial).
    Many thanks for all of your time and expertise

    Samantha
     

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