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MikeMcC874

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Hi folks, I have been lurking on here for a little while and figure its time I jump into the discussion as i`m getting serious about buying my first property and have a lot of questions.

I live in London, Ontario and am looking at buying something in London for my first property as I want an opportunity to work out some of the kinks and get familiar with the RTA etc. before I start considering Waterloo or Hamilton.

I have read Don Campbell`s 3 books and `think` I want to target multi-unit dwellings. I have done a fair amount of studying of the MLS duplex\triplex\quad listings here and what I am finding is that when I look at properties strictly on cash-flow, the properties in the low price range and less affluent parts of the city seem to flow much better than everything else. Based on the scorecard, these properties are still not a good investment as they are not in `up and coming areas`.

Do people still go near these properties?

Thoughts?

Thanks
Mike
 
More work certainly, and requires more experience and education to manage effectively, and also requires the ability for water (stress/problems/nasty people) to run off your back like water off a duck`s back. Hence the higher returns.

Get your education first, and try to learn from others - maybe offer to work for free for someone with managing their rentals to learn the ropes.

Start small and simple and grow as you are ready. You will know soon enough if you are cut out for this.

Once you know what you are doing, then find and hire an excellent property manager (very scarce) to manage for you.
 
QUOTE (MikeMcC874 @ Sep 23 2009, 01:21 PM) Hi folks, I have been lurking on here for a little while and figure its time I jump into the discussion as i`m getting serious about buying my first property and have a lot of questions.

I live in London, Ontario and am looking at buying something in London for my first property as I want an opportunity to work out some of the kinks and get familiar with the RTA etc. before I start considering Waterloo or Hamilton.

I have read Don Campbell`s 3 books and `think` I want to target multi-unit dwellings. I have done a fair amount of studying of the MLS duplex\triplex\quad listings here and what I am finding is that when I look at properties strictly on cash-flow, the properties in the low price range and less affluent parts of the city seem to flow much better than everything else. Based on the scorecard, these properties are still not a good investment as they are not in `up and coming areas`.

Do people still go near these properties?

Thoughts?

Thanks
Mike

Mike,

I have found the same thing in Calgary but have come up with a few questions I like to ask myself. 1, What are the tenants going to be like in both areas? 2, Which suite will be easier to rent? 3, Which property will appreciate more? 4, How many negative cash flow properties can you afford?

Personally I feel that I can take a little hit on cash flow if I feel the property will appreciate and the amount I will pay will be less than the amount of principle being paid off of the mortgage. Plus the property I like is cash flowing at the ultra low interest rates we currently have but with 6% interest, 100% financed and 10% vac rate I will end up loosing a little money per month (approx. equal to the taxes on the property). If I were to buy in a worse area then I would be able to have pos cash flow, but I feel the appreciation is not going to be close. Oh and I would never live in those areas so when a problem arises then I will have a 30 min drive to the property which will become annoying to me very fast. Let others chime in but this is what I have found. Keep in mind that I am starting off slower than most on here as I am a recent grad and have less money than most and may need to live in my property if times get tough.

Hope this helps, let us know what happens
Aiden
 
Garth has a great post
Don`t buy that as your first property
They can be very hard to find good tenant and very hard to manage.
Also very hard to find a good property manager that will take these type of places on.
Once you`re in an expert in your area you`ll also likely find out they offer a worse return - higher potential return - but worse return in practice as less actual collected rent, higher repairs.



QUOTE (GarthChapman @ Sep 23 2009, 05:55 PM) More work certainly, and requires more experience and education to manage effectively, and also requires the ability for water (stress/problems/nasty people) to run off your back like water off a duck`s back. Hence the higher returns.

Get your education first, and try to learn from others - maybe offer to work for free for someone with managing their rentals to learn the ropes.

Start small and simple and grow as you are ready. You will know soon enough if you are cut out for this.

Once you know what you are doing, then find and hire an excellent property manager (very scarce) to manage for you.
 
Good points here. One point I rarely hear discussed is the hard fact that when interest rates go up Real Estate prices go down. Everyone talks about appreciation as though it`s guaranteed to them each year which makes bricks and mortar a sexy investment for sure but what about when rates go up maybe even double and the expected CAP rates also go up? Do you have the long term vision, long term plan that will ride out such a decline? Don`t forget, we are now buying at all time high prices. The last peak was 1989. If you buy a property like this and it is worth 10, 20 or possibly 30% less and you descide to sell, what happens then. It`s been 19 years from from peak to peak so far.....a 5 year hold strategy may find you at the bottom with few buyers. Don`t assume appreciation or even current market value is a sure thing 5 years from now. That`s why every property I purchase, I buy with a 20 year plus plan in mind. If it is worth buying now it better be worth owning down the road. I was selling and buying after the last peak. Believe me, when prices drop Real Estate is no longer the latest hot topic at cocktail parties! THINK WARREN BUFFET!
QUOTE (housingrental @ Sep 23 2009, 06:23 PM) Garth has a great post Don`t buy that as your first property They can be very hard to find good tenant and very hard to manage. Also very hard to find a good property manager that will take these type of places on. Once you`re in an expert in your area you`ll also likely find out they offer a worse return - higher potential return - but worse return in practice as less actual collected rent, higher repairs.
 
QUOTE (aiden1983 @ Sep 23 2009, 03:02 PM) Personally I feel that I can take a little hit on cash flow if I feel the property will appreciate and the amount I will pay will be less than the amount of principle being paid off of the mortgage. Plus the property I like is cash flowing at the ultra low interest rates we currently have but with 6% interest, 100% financed and 10% vac rate I will end up loosing a little money per month (approx. equal to the taxes on the property).

This is potentially a huge landmine, although I like the fact that you`re using 10% vacancy and doing the projections for 6% interest. What were you paying yourself for property management?
 
QUOTE (ChrisDavies @ Sep 25 2009, 02:23 AM) This is potentially a huge landmine, although I like the fact that you`re using 10% vacancy and doing the projections for 6% interest. What were you paying yourself for property management?

Chris,
I assume $100 a month for PM which is on the low if someone else was doing it. The property I am considering is also a handyman special so it is more for building equity than getting pos cash flow. In Calgary I have not seen any single family houses located in nice (or even ok) neighborhoods which flow well that are not student housing. Do you find in Edmonton you can find properties that flow in nice areas (Duplex or single family)?
 
QUOTE (aiden1983 @ Sep 25 2009, 02:41 AM) Chris,
I assume $100 a month for PM which is on the low if someone else was doing it. The property I am considering is also a handyman special so it is more for building equity than getting pos cash flow. In Calgary I have not seen any single family houses located in nice (or even ok) neighborhoods which flow well that are not student housing. Do you find in Edmonton you can find properties that flow in nice areas (Duplex or single family)?

I do, but the reality is that it`s not the nice areas. To be an area in transition you have to suck now, so you`ve got somewhere to go. Thomas likes to say he buys C-class buildings in B-class neighbourhoods....Thomas and I have an understanding of C-class that`s probably a little different than others.

I might have to blog about this topic later, but I`ll leave it at that for now.
 
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