# Condo Investment Rental



## bobwatford123 (Aug 9, 2011)

Can anyone who owns a condo and rents it out comment on insurance costs? For some reason I have it in my mind that I read somewhere that insurance is included in condo fees in some cases.


----------



## the-royal-mail (Dec 11, 2009)

I had to pay around $125/yr for CYA insurance and the tenant was responsible for their own contents insurance. Not to be confused with building insurance that is often included in condo fees. 

Every situation is different. You need to check into your specifics. We can't begin to speculate on what your costs might be.


----------



## bobwatford123 (Aug 9, 2011)

Hi royal...thanks. Yes...I was pretty much referring to 'burning down the condo' type insurance. Sorry, not all that familiar with types of insurance. What is CYA? I'm just trying to weigh the costs of buying a condo and renting it out. Obviously condo fees and property tax...but insurance costs are the unknown to me. The condo wouldn't be mortgaged...it would be paid for outright.


----------



## marina628 (Dec 14, 2010)

Why would you pay cash for it then have to claim the rental income?Ideally you should try to have the Income and expenses close to same amount so you do not have to pay the income tax.


----------



## bobwatford123 (Aug 9, 2011)

marina628 said:


> Why would you pay cash for it then have to claim the rental income?Ideally you should try to have the Income and expenses close to same amount so you do not have to pay the income tax.


Not to get too off topic of the original question, but to be either completely naive or confused....to make money. 

I buy a $100,000 condo cash, charge $850 a month rent minus $350 a month condo fees/property tax and pocket $6000 per year (not taking into account rent raises) before taxes.

Or I mortgage it, charge $850 a month rent minus $350 a month condo fees/property tax minus $500 for the mortgage and while I pay no taxes I also make zero income from it. 
Of course I own it in the end with little money laid out, but if you break it down I think paying cash ends up being the better way to do it. 

Pay up front - 25 years from now 25x$6000=$150,000 before tax plus you own a $200,000 condo (or whatever it's worth in 25 years)
Mortgage it - 25 years from now you own a $200,000 condo without making the income all those years. Why would anyone mortgage it when they could pay cash? I know avoiding tax is the name of the game, but if that were the case in the truest sense I may as well just quit working as it would mean I'd pay no income tax 

I'm just comparing it to my money wasting away earning 2%, when I could buy a couple of condos and earn 5-6% with very little downside risk (the condo isn't going to lose much if any value and other than the odd vacancy it just makes cash....both of these reasons also make the mortgage idea look even worse in my opinion as you could actually lose money on the deal vs making income)


----------



## marina628 (Dec 14, 2010)

I guess we are in different situations , I have 5 rentals ,well I have two and my husband has 3 but we would lose 40% in taxes if we had them paid out.I also factor in the 3.5 or so mortgage rates and feel we can do better in the markets with our cash .We put down 20 -35% so they completely carry themselves.Who knows maybe I am doing something wrong


----------



## bobwatford123 (Aug 9, 2011)

Agreed, I see you are in the Toronto area...I'm in London and they are definitely going to be different situations. 
I'm not completely keen on the market right now, have a bunch of cash in some 'high' interest savings accounts, some in gold smallcap stocks etc. and just looking for some safer higher return investments. I like the market, but don't need full exposure with what appears to be a nasty ride that we are soon to be in for. When it crashes there is NO place to hide....no matter how blue the blue chip is...how 'fundy' the fund is....they'll lose 30-40% in the blink of an eye.

That being said, I do pick my spots, 

http://canadianmoneyforum.com/showthread.php?t=8472

and have made about 3 years worth of my 'condo income scenario' in the past month at half my tax rate...and with gold moving up to $1917 an ounce as I type this expect to earn at least 3 more years worth before Christmas....and I'm probably low


----------



## marina628 (Dec 14, 2010)

Bob my first try at stocked were penny stocks about 1994 i guess ,it was fun but I was horrible at it lol.Anyway good luck on your investment


----------



## Lephturn (Aug 31, 2009)

If you can't mortgage 75% at a reasonable rate and still stay cash flow positive, it's not a great investment IMO. Buying in cash makes it look profitable, but that's a pretty poor rate of return on 100k. Your numbers leave out expenses for maintenance and vacancy. I can buy 100K worth of Canadian bank stocks and yield out 4.5% every year in dividends with a hell of a lot less risk and time than it would take to buy and rent a condo.

You could take that 100k and buy 4 condos with 75% mortgages for example and end up much better off provided you could find money making properties. That can be done, but it will take some work.


----------



## iherald (Apr 18, 2009)

bobwatford123 said:


> What is CYA?


Usually it refers to cover your ***. What if someone slips on the floor in your rented condo. Who are they going to sue? They'll sue the tenants and you. so you want to cover your ***.


----------



## kcowan (Jul 1, 2010)

bobwatford123 said:


> ... I read somewhere that insurance is included in condo fees in some cases.


Check with the HOA. I suspect they insure the common areas and the structure, leaving fitup to the individual owner, but you cannot assume anything.

So that leaves fitup, contents and liablilty. As TRM says, leave contents insurance to the renter if the furnishings are not included in the rent. Large appliances might be the exception.

If someone falls off your balcony, who is liable?


----------



## bobwatford123 (Aug 9, 2011)

Thanks all, that clears it up for the most part.


----------

