It’s all very one side response if you ask me. But I think I need to keep in mind that you are a real estate analyst? Correct?
It’s about the same to me as when I ran my own businesses, I had (have) a very good accountant that I definitely needed when it came to making good choices on the money earned, but for sure I knew pretty quick that accountants are (in general) no entrepreneurs an I wouldn’t go to them for business advice.
I think I would put you in that category also.
Let’s just make it simple
100K investment today on 3% return will, after inflation, (let’s keep that low at 1.5%) earn you 75K over 25 yrs
100K investment on a 350K house (75 DP and 25K suite development) over 25 yrs with $500 cashflow monthly
Adds up to 150K just cash flow over 25 yrs
Let’s say your cyclical expenses, roof, windows, doors, siding Etc is adding up to $60K over 25 yrs. (sometimes you get lucky with an insurance claim so the 60K could be way less)
25 yrs of owning the prop, again we will go moderate and say value increased 25% is $87,500.00
Mortgage paid down to 0 after 25 years. Both principal and interest paid for by tenants.
About paying 3% interest on the mortgage, why would I/we care? Who is paying for that? Yup, my tenants.
Add up and subtract/calculate and decide for yourself what is better.
Now, your assumption is that we are all dumb people and don’t know how to manage a property?
So, yup we will all pay 15% management fee, (by the way that’s a point you are right on, 10% is standard but upcharges on many things could amount to 15% annually)
NOT SO! I know that many people on this forum do an excellent job managing themselves at 0%
I would want to point out that it’s the same principal I used when running my own small businesses. What you can do yourself is money in your pocket.
I could have hired managers for each business I had at 80K per job annually to manage my businesses and the staff of appr 50. Would have costed me a total of 240 K annually for 3 of the businesses that I ran simultaneously.
Yet, I went without managers, worked my ass off from 6 am till 10 pm 6 days a week, till my wife started bulking at the idea I was married to my business instead of her. So.......I ANALYZED her valid complaints and decided to sell everything off and started investing in RE. Now she is complaining I’m home to often. (Not true, she is very happy)
Guess that’s what my expensive hobby did for me.
A few other things, I have read before on these forums that value ad on a suited prop is zero, however I have seen otherwise in the Calgary area by experience, similar props, but one suited (legal) and another not for 40K difference. Seems there is a value ad for income producing props. Maybe not in Edmonton? Could be.....don’t know that market well enough. But in any case,if prop doesn’t have value ad due to being suited, it will still increase in value over a loooong timespan of owning it. Even when a market is down or flat for a while.
I have no problem with you holding a mirror in front of us, cause thats what your comments can do, so,e things you say are definetely food for thought, you just have to lay low on your certainties and truths that you are presenting to us.
What I would like to know tho from you, what real estate product have you invested in? And give us some friendly advice on why that is the better route, and what we can expect in returns over a 25 years period, cause we might be dumb, but never tired of learning and making money the easy way.