Real Estate

How to chose best rental property

  • Last Updated:
  • Sep 9th, 2021 9:55 pm
Deal Addict
User avatar
Oct 24, 2016
1403 posts
1451 upvotes
ON
Centre of the Universe?
”If you buy things you don’t need, soon you will have to sell things you need.”
Deal Fanatic
Mar 15, 2005
5736 posts
1321 upvotes
andreagasparova wrote: 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
Your math is overly optimistic IMO

If you bought a 775K house you would need to put down around 425K (55%) to keep the mortgage around $1450 a month

You are probably low by around $100/month on your condo fee estimates, and haven't budgeted for special assessments

You didn't account for Land Transfer tax here

Property management would probably run you 1-2 months rent
Sr. Member
Oct 14, 2010
717 posts
801 upvotes
Toronto
100% occupancy seems an inherent assumption here.
But if you are convinced by your numbers and comfortable with it, then go for it. I am sure you will come out ahead over the long term.
Good luck!
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
Ziggy007 wrote: Your math is overly optimistic IMO


If you bought a 775K house you would need to put down around 425K (55%) to keep the mortgage around $1450 a month

You are probably low by around $100/month on your condo fee estimates, and haven't budgeted for special assessments

You didn't account for Land Transfer tax here

Property management would probably run you 1-2 months rent
Thank you for the feedback... it is always good to hear other opinion.
Mortgage portion is not optimistic... we are already approved
Amount of condo fee is optional in a sense that we will only chose property that has condo fee under $400... I understand it will limit our options but higher condo fees would mean negative cashflow and we don't want that.
What is special assessment?
I did not mention it but I did account for land transfer tax... it is part of closing cost that we budgeted into price of our new house... so even though we have $775000, max purchase price can only be 748000 - 760000... depending on the area.
Not sure what this mean: "Property management would probably run you 1-2 months rent"... do you mean that yearly property management would cost us 1-2 month rent? If yes, then we did underestimated it and have to do more research there.
Thanks again.
Newbie
Dec 3, 2018
11 posts
9 upvotes
GTA
You can be cashflow positive on some condo townhouses right now, particularly ones with low maintenance fees. Sales of semis/detached do exist within your price range, they will require some reno and not be in the greatest neighbourhoods but that does not mean you can't make money there. My advice would be to not count on appreciation alone and make sure you get something where you will be cashflow positive.
Flat fee and cashback real estate agent in the GTA.
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
budwizestest wrote: 100% occupancy seems an inherent assumption here.
But if you are convinced by your numbers and comfortable with it, then go for it. I am sure you will come out ahead over the long term.
Good luck!
Very good point about the fact that we did calculation based on 100% occupancy... We should adjust that... even though occupancy of our other property in the past 4 years has been 100%... and 6 years prior to that, it wa very close to 100%... rental market is very competitive.
Thank you
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
evadav wrote: You can be cashflow positive on some condo townhouses right now, particularly ones with low maintenance fees. Sales of semis/detached do exist within your price range, they will require some reno and not be in the greatest neighbourhoods but that does not mean you can't make money there. My advice would be to not count on appreciation alone and make sure you get something where you will be cashflow positive.
Yes, new build condo townhouses with low maintenance fee are excellent choice and there is good selection on the market for our budget... They go for high rent and (hopefully) will require very little update in the next 7-10 years. I only hesitate because I am not sure about their resale value after 20 years... My realtor is pushing for that option too. My friend who is also realtor is pushing for detached or semi in Oshawa....
Newbie
Dec 3, 2018
11 posts
9 upvotes
GTA
Not sure why they would advise you to buy in Oshawa of all places, are you up for driving all the way there and back each time something leaks or there is an issue? As for appreciation on the condo townhouse, you are going to be making money monthly, you are also going to have your mortgage paid off, so even if it doesn't appreciate as much as another type of home you are still going to make a lot of money given the long term you are buying for. Of course a detached/semi is a better investment (given you can afford to buy it and maintain it), but I would think carefully about where I am buying.
Flat fee and cashback real estate agent in the GTA.
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
evadav wrote: Not sure why they would advise you to buy in Oshawa of all places, are you up for driving all the way there and back each time something leaks or there is an issue? As for appreciation on the condo townhouse, you are going to be making money monthly, you are also going to have your mortgage paid off, so even if it doesn't appreciate as much as another type of home you are still going to make a lot of money given the long term you are buying for. Of course a detached/semi is a better investment (given you can afford to buy it and maintain it), but I would think carefully about where I am buying.
Oshawa (east in general) is now the only place we can buy detached with the budget we have. Our friend thinks prices there will climb steeper than prices you can see in the west or north of Toronto.... so he feels like that is good potential. For sure, we would have to get property management for house in Oshawa. No way I would drive that distance. What I like about Oshawa is that it offers 2 unit property (basement and upper) and that provides the biggest profit of all options.... even if we calculate with property management fee and much higher taxes than in Toronto or Brampton.
Member
User avatar
Jan 7, 2019
368 posts
373 upvotes
andreagasparova wrote: Thank you for the feedback... it is always good to hear other opinion.
Mortgage portion is not optimistic... we are already approved
Amount of condo fee is optional in a sense that we will only chose property that has condo fee under $400... I understand it will limit our options but higher condo fees would mean negative cashflow and we don't want that.
What is special assessment?
I did not mention it but I did account for land transfer tax... it is part of closing cost that we budgeted into price of our new house... so even though we have $775000, max purchase price can only be 748000 - 760000... depending on the area.
Not sure what this mean: "Property management would probably run you 1-2 months rent"... do you mean that yearly property management would cost us 1-2 month rent? If yes, then we did underestimated it and have to do more research there.
Thanks again.
Can you provide us the math on the mortgage payment part?

I did a quick calculation using:

$604,000 (LTV 80%)
Monthly Blended payment
30 year amortization
5 year variable at 1.35% or (P-1.1)
Monthly is $2041.33

You're $600 lower than what I've seen the lowest rates are going for.
Remember to always Thumbs Up good responses! Spread positively.
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
BrokeMillennial wrote: Can you provide us the math on the mortgage payment part?

I did a quick calculation using:

$604,000 (LTV 80%)
Monthly Blended payment
30 year amortization
5 year variable at 1.35% or (P-1.1)
Monthly is $2041.33

You're $600 lower than what I've seen the lowest rates are going for.
we have good down payment - $350000
$425000 loan
30 year amortization
5 year variable at 1.45%
Deal Addict
Nov 26, 2004
3812 posts
2990 upvotes
andreagasparova wrote: Now this is great idea... I never even considered other provinces... thank you.
Just to add, there are no land transfer tax in Alberta, so with your max price, you save $23k right off the bat.

At this moment, IMHO, most people speculate in Ontario and invest in places like Alberta.

I am still trying to understand why for a lot of buyers, they are restricted to buying real estate at where they live.
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
William W wrote: Just to add, there are no land transfer tax in Alberta, so with your max price, you save $23k right off the bat.

At this moment, IMHO, most people speculate in Ontario and invest in places like Alberta.

I am still trying to understand why for a lot of buyers, they are restricted to buying real estate at where they live.
Wow... even sweeter without that land transfer tax. I am going to check how is rental market.
Thank you again.
Newbie
Sep 5, 2019
40 posts
68 upvotes
andreagasparova wrote:
Wow... even sweeter without that land transfer tax. I am going to check how is rental market.
Thank you again.
Prices in Alberta have gone up 20% in the last 10 years while GTA and GVA have gone to the moon. Problem is there aren’t many immigrants that want to settle down there and population demand pressure is the main driver behind RE gains.

I would call an investment in Alberta even more speculative than Ontario because you are hoping for a fundamental shift to the market, in order to get any significant appreciation.
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
barkwark wrote: Prices in Alberta have gone up 20% in the last 10 years while GTA and GVA have gone to the moon. Problem is there aren’t many immigrants that want to settle down there and population demand pressure is the main driver behind RE gains.

I would call an investment in Alberta even more speculative than Ontario because you are hoping for a fundamental shift to the market, in order to get any significant appreciation.
Thank you for the advice.
Deal Fanatic
Feb 4, 2010
6701 posts
6304 upvotes
If you don't know the difference between a cheque and a bank draft, I highly recommend NOT becoming landlords because you really have to do your due diligence and know what you're doing. Have you read the tenant/landlord stories on here? You're just asking for a world of hurt.
Member
User avatar
Jan 7, 2019
368 posts
373 upvotes
andreagasparova wrote: we have good down payment - $350000
$425000 loan
30 year amortization
5 year variable at 1.45%
Ahh ok, so your downpayment is going to be much larger than the 20% I was using in my calculation. If this is the case, where you have more funds available to put as D/P, then the majority of the DT Toronto Condo's should be cashflow positive right out the gate.

Choose one that has a great location, and no pool.....and you should be fine.

Good luck!
Remember to always Thumbs Up good responses! Spread positively.
[OP]
Newbie
Aug 17, 2021
72 posts
34 upvotes
BrokeMillennial wrote: Ahh ok, so your downpayment is going to be much larger than the 20% I was using in my calculation. If this is the case, where you have more funds available to put as D/P, then the majority of the DT Toronto Condo's should be cashflow positive right out the gate.

Choose one that has a great location, and no pool.....and you should be fine.

Good luck!
Thank you... just curious... why no pool? Is that higher condo fee?
Sr. Member
User avatar
Feb 28, 2012
599 posts
476 upvotes
Vaughan
If I was investing 800k in real estate right now it wouldn’t be in Ontario.

But anyway OP it sounds like you want nice monthly cash flow but also want to retire in 15-20 years. My opinion is your strategy is flawed for real estate. If you want cashflow, buy in the US or Atlantic Canada. Otherwise if you’re dead set for Ontario then buy two houses in London or a similar location with growth potential. Wait 5 years, refinance, go buy two more. In 20 years you’ll have 8 properties and a viable retirement portfolio.

It doesn’t make sense to put a big down payment for a property. Rates are low and not rising, you’re leaving too much money on the table tying up all that capital.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)