Real Estate

How to chose best rental property

  • Last Updated:
  • Sep 9th, 2021 9:55 pm
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes

How to chose best rental property

Hi everyone,
Would you please give me advise or opinion?
What would be the best income property for us?
Budget: $775000
Plan is to keep property at least 15-20 years. Than sell it and use money for retirement.
We live in north Etobicoke.

Everybody seems to have different advice... for example:
Buy nice new condo close by because of new LRT on Finch
Buy nice new condo, townhouse in Vaughn because it is nice area
Buy detached house in Oshawa because it will appreciate the most
Buy semi in Brampton you will have nice monthly profit
My favorite is very small semi in Toronto - I am thinking it will have good monthly income from rent and will appreciate a lot.

Now with Covid ...will it be even important to be close to downtown or TTC when most people work from home? Maybe large home and backyard are going to be more valuable than good TTC connection.
Do townhouses (without backyard) and condos appreciate at all?
49 replies
Deal Addict
Nov 9, 2013
4788 posts
5357 upvotes
Edmonton, AB
There are many ways to make money in real estate, it's not one size fits all.

I'd say the best thing you can do is educate yourself about 1) the pros / cons of each type of property (townhome / condo (aka strata), single family detached, multi family) and then educate yourself on 2) geographical location. Then, set a minimum return hurdle rate, see what you can find, and run the numbers.

Once you've done 1) and 2), stay focused on that type of home in that specific area and just keep your eye on the market.
Keep calm and go long
Jr. Member
Dec 3, 2017
187 posts
136 upvotes
I would go for detached if holding for longterm. Detached houses (in a good location) will become rare and prices will go up the most.
Deal Addict
Feb 19, 2019
1773 posts
2715 upvotes
Stouffville ON
One glove doesn't fit all so apart from the budget you need to consider how hands on you want to be, location, commute, how handy you are, cashlfow, income, future potential appreciation and so on.

Condos will require the least amount of effort.

A freehold with two rental units will get you better cashflow but more work and not likely close to where you live.
Full Time and Full Service Realtor
Deal Addict
Nov 23, 2003
2163 posts
642 upvotes
Not much you can buy for $775000 so discussion about semis and detached here doesn’t make sense.
Member
User avatar
Jan 7, 2019
368 posts
373 upvotes
Singh_21 wrote: Not much you can buy for $775000 so discussion about semis and detached here doesn’t make sense.
This. For $775,000, your options are condo, pre-construction condo, or super suburban semi/townhouse.

However for rental, I would go with downtown, midtown, or a condo along the TTC/Subway line. First couple of years it might be cashflow negative but it should break even afterwards.
Remember to always Thumbs Up good responses! Spread positively.
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
Thank you everyone for advice.
Yes, there is so many factors that we have to consider.
We can not afford to buy property with negative cashflow.
Interestingly all those options I mentioned in the beginning have approximately the same monthly profit. We are very flexible on other factors like distance, amount of work to fix or rent it. So it comes down to appreciation of property. And one thing that I do not know is how will condo or condo-townhouse appreciate/depreciate after 15-20 years. I can update interior but building itself will only depreciate and because I do not own the land, will my 20 year old condo have higher resale value then when I bought it?
Deal Fanatic
Mar 15, 2005
5720 posts
1292 upvotes
andreagasparova wrote: Thank you everyone for advice.
Yes, there is so many factors that we have to consider.
We can not afford to buy property with negative cashflow.
Interestingly all those options I mentioned in the beginning have approximately the same monthly profit. We are very flexible on other factors like distance, amount of work to fix or rent it. So it comes down to appreciation of property. And one thing that I do not know is how will condo or condo-townhouse appreciate/depreciate after 15-20 years. I can update interior but building itself will only depreciate and because I do not own the land, will my 20 year old condo have higher resale value then when I bought it?
You can't afford to be a landlord right now then

A lot of properties are cashflow negative for the first few years and the only gains are through equity
Sr. Member
Oct 14, 2010
570 posts
597 upvotes
Toronto
Ziggy007 wrote: You can't afford to be a landlord right now then

A lot of properties are cashflow negative for the first few years and the only gains are through equity
Agree, if you cant be ok with cash flow negative, this isn't for you.
Current prices have ensured that being cash flow positive doesn't happen without a massive downpayment.
The game has shifted to where you need to be OK with negative cash flows for an extended period of time.
Deal Addict
Nov 9, 2013
4788 posts
5357 upvotes
Edmonton, AB
budwizestest wrote: Agree, if you cant be ok with cash flow negative, this isn't for you.
Current prices have ensured that being cash flow positive doesn't happen without a massive downpayment.
The game has shifted to where you need to be OK with negative cash flows for an extended period of time.
I disagree re negative cash flow - it all depends on where you look and how widely you can cast your net.

Maybe you can't get positive cash flow in a big city like Toronto, or anywhere in the GTA, but in other major cities in Canada (like Edmonton and Calgary as a current example) you can get cash flow positive properties off MLS.
Keep calm and go long
Sr. Member
Oct 14, 2010
570 posts
597 upvotes
Toronto
treva84 wrote: I disagree re negative cash flow - it all depends on where you look and how widely you can cast your net.

Maybe you can't get positive cash flow in a big city like Toronto, or anywhere in the GTA, but in other major cities in Canada (like Edmonton and Calgary as a current example) you can get cash flow positive properties off MLS.
Umm....the OP is all about COTU though....
Deal Addict
Nov 9, 2013
4788 posts
5357 upvotes
Edmonton, AB
budwizestest wrote: Umm....the OP is all about COTU though....
OP never states she has to be in COTU although you're right, it's implied.

My point is that you can find cash flowing properties in other areas. So, if the cash flowing requirement is fixed (and I think it should be - appreciation is not a guarantee) it's time to broaden the horizons.
Keep calm and go long
Deal Addict
Nov 26, 2004
3750 posts
2881 upvotes
Find and buy 2 similar ones to this one.

https://www.realtor.ca/real-estate/2352 ... -abbeydale

Rent it for $1650 to $1700 each. So after property management, you net $1485 to $1530 to pay for other expenses. Highly unlikely, but worst case scenario is real estate prices there doesn't go up a dollar during the time of your ownership. So 25 years later, your tenants would have paid off the rest of your mortgage for you and the 20% down, or $130k ish you put down today would turn into $650k. And because you bought 2, at the time of your retirement, you will have the option of keeping one and selling the other if you wish and stagger the sale to minimize the tax impact.

Another positive is you don't have to deal with tenants, and you are not operating in an environment where the tenant law is stack against the mom and pop landlords.
Deal Addict
May 23, 2006
1521 posts
552 upvotes
Vancouver
Maybe op doesn't need a mortgage.

Without mortgage interest cost, it is easily cash flow positive for almost all rental properties
budwizestest wrote: Agree, if you cant be ok with cash flow negative, this isn't for you.
Current prices have ensured that being cash flow positive doesn't happen without a massive downpayment.
The game has shifted to where you need to be OK with negative cash flows for an extended period of time.
Sr. Member
Oct 14, 2010
570 posts
597 upvotes
Toronto
Fantastical wrote: Maybe op doesn't need a mortgage.

Without mortgage interest cost, it is easily cash flow positive for almost all rental properties
If OP didn't need a mortgage then she wouldn't be saying cash flow negative is not doable.
Also, putting all if your own money into a mortgage at today's rates is lunacy. You are better off investing the money elsewhere, RE's big advantage is leverage. If you are unleveraged then missing the whole point on investing in RE. Also, I did mention cash flow negative unless there is a massive down payment.
Member
User avatar
Jan 7, 2019
368 posts
373 upvotes
So, aside from all the debate over "what ifs"...It all comes down to hunting of the property. If you find any random condo listed on MLS, you're most likely going to be cashflow negative.

If you take your time to do your due diligence and hunt for deals, the likelihood of positive cashflow is a lot higher. Case in point, my partner bought a condo through assignment at the Hwy7 and Warden area for $435,000 and has leased it out for $1700/month. She's ALMOST cashflow positive but she could've easily put a higher downpayment which would've made her CF positive on this property.

If you can find deals like this....it's a win!
Remember to always Thumbs Up good responses! Spread positively.
Deal Addict
Nov 9, 2013
4788 posts
5357 upvotes
Edmonton, AB
Fantastical wrote: Maybe op doesn't need a mortgage.

Without mortgage interest cost, it is easily cash flow positive for almost all rental properties
I don't know if real estate is such a good investment, without leverage. It's the easy, cheap leverage that makes it so powerful. I would just put my money in a broad based index fund if I had a big lump sum and didn't need leverage.
Keep calm and go long
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
Hmmm.... discussion has shifted little bit to cash flow positive/negative.
I see there is lots of help here so I will explain my situation and plan in more detail and maybe somebody will point out any possible mistakes this plan has:
There is plenty of cash flow positive properties available for us but maybe I overlooked something in our plan...

These are monthly expenses we planned for rental property:
Mortgage - max $1456... if price of property is $775000
House insurance - max $150
Repairs - this is very unpredictable but we plan to put aside $200 to cover regular wear and tear
Property taxes - max $375
Condo fees - max $400... condos with higher fees eat too much profit
Property management - $200 for houses that are too far.


3 bedroom house in Brampton sold 2 weeks ago for $740000 - our total expenses would be $2026... estimated rent is $2300 - 2500
2 unit (upper and basement) house in Oshawa sold last week for $740000 - our total expenses would be $2250..... estimated rent between $2800-3200
Very small 2 bedroom semi in Toronto sold for $745000 week ago - our total expenses would be $1940..... estimated rent is $2000 - 2200
2 bedroom townhouse in Vaughn sold couple days ago for $750000 - our total expenses would be $2120.... estimated rent is $ 2300 - 2600
2 bedroom condo townhouse few blocks from us sold last week for $576000 - our total expenses would be 1700... estimated rent is $2000 - 2100
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
William W wrote: Find and buy 2 similar ones to this one.

https://www.realtor.ca/real-estate/2352 ... -abbeydale

Rent it for $1650 to $1700 each. So after property management, you net $1485 to $1530 to pay for other expenses. Highly unlikely, but worst case scenario is real estate prices there doesn't go up a dollar during the time of your ownership. So 25 years later, your tenants would have paid off the rest of your mortgage for you and the 20% down, or $130k ish you put down today would turn into $650k. And because you bought 2, at the time of your retirement, you will have the option of keeping one and selling the other if you wish and stagger the sale to minimize the tax impact.

Another positive is you don't have to deal with tenants, and you are not operating in an environment where the tenant law is stack against the mom and pop landlords.
Now this is great idea... I never even considered other provinces... thank you.

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