What would you do with this money?

[jonathanb]

We are in the process of selling a vacant piece of property. After all transaction costs, we will be left with about $280,000.



We currently own two student rentals in Waterloo, and id like to buy more property in the future, im just not sure what, or when.



I could use the money to pay down some debt, or keep it in cash? Or what?



Just throwing this out there to see what you guys think.



Thanks!



jon

 

[bizaro86]

Depends on your plan and your goals.



Do you currently own enough property to meet your long term goals? If you have enough properties that they would meet your income goals if they were paid off, I'd consider taking that and knocking down your mortgages, as it would shorten your amortizations significantly.



If not, it probably makes sense to add more properties until you get that number of properties. It might make sense to layer the money into the market. (ie buy 3 properties over 5 years instead of 3 months)

 

[Thomas Beyer]

Buy an apartment building for 700-900K .. 30% to 35% down in an area with upside and strong rental demand. CMHC money at sub 3% ! Great cash-flow at that leverage level and decent equity/rental upside plus mortgage paydown all adds up to a 12-25% ROI/year depending on assumptions/area/skills/price !

 

[jonathanb]

Thanks Michael and Thomas!



I do NOT currently own enough real estate to fulfill my long term goals, and i plan to add to the portfolio... i just need to determine what direction id like to go. Things are a tad shaken up here in Waterloo and i may be changing what type of property i will buy next and where it will be as well. So it may take 6 months to a year to figure out what id like to do, then find that property. Especially if its larger Multi Family as Thomas suggested. Not sure what i should do with the money in the meantime.



Thanks again guys!



jon

 

[housingrental]

Hi Jon

Keep your money in cash and wait.

If there's a fall back in prices, pickup a top quality product in prime location between University of Waterloo and WLU to own long term.

Patience for the right opportunity at the right price is key.

If you choose well you might own the place for 50+ years.... no reason to rush.

If you need something sooner send me another email and I'll sell you something of mine

 

[jonathanb]

Like you said Adam, "the right price is key"

 

[Pheenix]

My suggestions;

• Arrange to pay any taxes ;-)
• Eliminate/reduce revolving debt, most expensive to cheapest
• Try and convert longer term debt (mortgages say) to a secured floating line of credit/loan, and minimize balances
• ensure RRSP's and TFSA maxed
  look to easing (dollar cost in on dips) into approx 10-20% of net worth in a liquid form, ie. balanced portfolio; - 25% each; Broad index equity ETF's, Long Term Treasuries, Precious Metal Fund (fully back by actual holdings), Short term instruments and cash (most Canadian banks will provide a balance portfolio model for you to consider) - review quaterly, rebalance annually or when any one segment moves more than 20%
  any remainder in cash and short term instruments
  celebrate prudently
  watch for the next RE entry point

Good luck and have some fun

 

[Thomas Beyer]

[quote user=Pheenix]My suggestions;

• Arrange to pay any taxes ;-)
• Eliminate/reduce revolving debt, most expensive to cheapest
• Try and convert longer term debt (mortgages say) to a secured floating line of credit/loan, and minimize balances
• ensure RRSP's and TFSA maxed
  look to easing (dollar cost in on dips) into approx 10-20% of net worth in a liquid form, ie. balanced portfolio; - 25% each; Broad index equity ETF's, Long Term Treasuries, Precious Metal Fund (fully back by actual holdings), Short term instruments and cash (most Canadian banks will provide a balance portfolio model for you to consider) - review quaterly, rebalance annually or when any one segment moves more than 20%
  any remainder in cash and short term instruments
  celebrate prudently
  watch for the next RE entry point

prudent insight here .. but if you can borrow @ 3% and buy a commercial or multi-family property with a 5-6% yield/CAP rate .. is this not more prudent than paying down debt ?



re next RE entry point .. in ALBERTA: it was fall 2010 or 2nd best: NOW !! [ we unloaded over 50% of our AB portfolio n 2007 and have started buying in fall / winter 2010 and looking to acquire more now]

 

[jonathanb]

Thank you to everyone for your replies! I appreciate the feedback



jon

 

[housingrental]

So what's the decision Job?

Is a new piece of Hazel St. Waterloo in your future?

 

[2ndstory]

[quote user=housingrental]Keep your money in cash and wait.






Wouldn't do that. Invest or pay down debt. Cash should never sit. Especially over a 1/4 million dollars of it. Inflation will eat at it. Make it work for you whatever you do.



Nik

 

[housingrental]

Hi Nik

Under your strategy, how will you take advantage of market down turns if financing isn't available at that time - and when this is so isn't this the best time to buy ?

 

[2ndstory]

[quote user=housingrental]Hi Nik

Under your strategy, how will you take advantage of market down turns if financing isn't available at that time - and when this is so isn't this the best time to buy ?





Invest in something liquid. Pay down debt on something secure like a piece of real estate if you want and then pull the equity out when you need it. Mathematics never lie. Putting a quarter million dollars in a sock to wait for the right time is silly if you are paying interest on something or could be making interest on it elsewhere.



Nik

 

[jonathanb]

[quote user=housingrental]So what's the decision Job?

Is a new piece of Hazel St. Waterloo in your future?






Adam, things have changed recently here work wise. We have a family business, and my father just announced he would like to retire. Which means we will likely end up using the money to buy out his shares.



Looks like Hazel may have to wait

 

[housingrental]

Nik - What if you can't pull the money out when you need it because financing isn't available?

You see there is benefit to sitting in waiting in cash....

 

[housingrental]

Not a bad use of money - and I'm sure will pave the way for more locations in the future



What place did you sell?



[quote user=jonathanb][quote user=housingrental]So what's the decision Job?

Is a new piece of Hazel St. Waterloo in your future?






Adam, things have changed recently here work wise. We have a family business, and my father just announced he would like to retire. Which means we will likely end up using the money to buy out his shares.



Looks like Hazel may have to wait