mortgage pre-payment or downpayment on rental property?

[AlexH]

option 2: i am also considering, along with 2 friends, purchasing a rental condo within toronto.

Personally, I would do the mortgage prepayment but make sure you are able to get a home equity loan in the future, so you can put a down payment on a condo all on your own.

[hawkgt]

yes. that is obviously a concern. we've discussed this and have agreed that we would need some kind of legal document that covers exit strategy etc. i've heard of horror stories of friendships ending over business deals but i also know of positive outcomes as well.

it seems the overwhelming majority is in favour of the mortgage pre-payment. i can take a hint

anybody think the rental property is a good idea?

While option 2 is quite tempting, I would have to go with option 1 based on this fact alone: i am also considering, along with 2 friends

That can get a tad tricky, with ensuring everyone puts up their part, PLUS the complications later if someone wants to sell, but others don't etc. Stick with the safe bet. If it was just you, option 2 may be more viable and less risky, but personally, I wouldn't bother with that hassle, even if it were 2 members of my own family, let alone friends.

[grant]

i've down some research into rentals in the core and our monthly carrying costs would exceed the rent we could charge.

WHY would you buy an 'investment' that loses money??

forget it!

[controlyar]

WHY would you buy an 'investment' that loses money??

forget it!

For an investment to be worthwhile, the cash flow does not have to be higher than the income generated. Perhaps you forgot about an increase in property value upon disposition which is referred to as a capital gain.

[hawkgt]

WHY would you buy an 'investment' that loses money??

forget it!

i agree. i haven't found a property yet that could balance the numbers. but i do think there are properties out there that could. but i wouldn't purchase a place unless i was comfortable with the carrying costs/income.

For an investment to be worthwhile, the cash flow does not have to be higher than the income generated. Perhaps you forgot about an increase in property value upon disposition which is referred to as a capital gain.

it's probably because i'm a newbie at that this but i wouldn't feel comfortable taking a loss each month in return for the housing appreciation. it seems as if at that point, other vehicles of investment may have a better return.

thanks guys! i think we're at 7-0 prepayment. most onesided poll ever.