# Renting our new condo



## KelownaCondo (Oct 7, 2017)

Hi everyone. been reading this forum for a while now. Looking to pick a few brains. I bought a new condo in Kelowna 2 year ago. Its going to be closing within the next 6 months and i don't think i will be able to move there yet. I was looking to just rent this unit out and buy another condo/house. On the forum i see people post their monthly expenses but include the principle mortgage payment. Bought the place for $235k and is now roughly hovering $300 now. I put down 46K..So the total mortgage is around $185. Only thing I'm worried about right now is tax time. I'm a electrician, make roughly 90k/year. I want to break even minimum at the end of the year....

So right now the expenses:

Interest on Mortgage
Insurance
Condo fee's
Management fee (10%)
Deprecation? 


Thanks everyone


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## KelownaCondo (Oct 7, 2017)

Sorry about the grammar, was talking on the phone.

To add, the building has no Pool etc.. Condo fee's are low at $140/month. Downtown...lots going up in the area.


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## OnlyMyOpinion (Sep 1, 2013)

Welcome aboard!
It is probably me, but I'm not sure what you are asking. Are you asking whether to sell or rent? 
Are you asking how much to rent for to be covering your monthly carrying costs?
1.You mention being worried about tax time - from the perspective of a capital gain if you sell, or of rental income if you rent?
2. You mention this condo closing within 6 mos (~mid-April) and you mention considering buying another condo/house - is that part of the discussion?
3. You mention wanting to break even at the end of the year - what cost/expense compared to what gain/income? 

*Added: I guess your thread title tells us (duh) 'renting our new condo'.*
The other items threw me off.

So let me ask: how long do you expect to rent it?
Are you planning to move into the unit yourself, or will it remain a rental and you will buy another nearby (as you mention)?


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## KelownaCondo (Oct 7, 2017)

OnlyMyOpinion said:


> Welcome aboard!
> It is probably me, but I'm not sure what you are asking. Are you asking whether to sell or rent?
> Are you asking how much to rent for to be covering your monthly carrying costs?
> 1.You mention being worried about tax time - from the perspective of a capital gain if you sell, or of rental income if you rent?
> ...




Sorry  decided to get on the computer instead of the smartphone.

So i will be keeping this condo to rent out. I could probably get $1300-1400/month rent on this unit. 

I'm just wondering how can you possibly get enough monthly expenses to cover the $1400 you get paid monthly by the tenant if you cant count the mortgage principle?

I will be buying another property in 2-3 years.

Sorry for the confusion.

Thanks


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## KelownaCondo (Oct 7, 2017)

It was a pre constrction condo that will be finally be finished this spring


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## Just a Guy (Mar 27, 2012)

KelownaCondo said:


> I'm just wondering how can you possibly get enough monthly expenses to cover the $1400 you get paid monthly by the tenant if you cant count the mortgage principle?


You don't pay that much for a rental to begin with. It's pretty simple. You may want the place to be a cash flowing rental, but the math says it isn't. 

Would you overpay for any other investment? What if I could sell you some IBM stock for twice what it's trading for today, it pays a dividend...someday it may climb to that price and afterwards you'll be making money. 

Imagine what your numbers are going to be like if interest rates keep rising. It's not a cash flowing rental. If you're lucky, maybe you can sell it and make some quick capital gains...then again, probably a lot of other people are thinking the same thing so there will be lots of competition and thus lower prices.


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## KelownaCondo (Oct 7, 2017)

It would be nice for the place to be cash flow positive, which it should. I bought the place a few years ago and the rental market in Kelowna is crazy. 

Maybe, I'm just looking for a way not to pay taxes on positive cash flow.


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## Spudd (Oct 11, 2011)

KelownaCondo said:


> It would be nice for the place to be cash flow positive, which it should. I bought the place a few years ago and the rental market in Kelowna is crazy.
> 
> Maybe, I'm just looking for a way not to pay taxes on positive cash flow.


It's better to pay taxes on positive cash flow than not to have positive cash flow.


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## Just a Guy (Mar 27, 2012)

You understand you only pay taxes when you make money right? If you don't pay taxes, no money is going into your pockets, or I suppose you're doing something illegal. You only pay a portion of the money you make as well, so, if you pay a dollar, you must have made at least two after expenses.

Rental markets are price driven, if you can only rent it for $1400, and it costs you $1400, you're going to lose money in he long run due to vacancy and maintenance at least. Not to mention the fact that you're ignoring. The money you used as a down payment which isn't earning anything for you.


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## KelownaCondo (Oct 7, 2017)

Spudd said:


> It's better to pay taxes on positive cash flow than not to have positive cash flow.


Very true Sir! Very true


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## KelownaCondo (Oct 7, 2017)

Just a Guy said:


> You understand you only pay taxes when you make money right? If you don't pay taxes, no money is going into your pockets, or I suppose you're doing something illegal. You only pay a portion of the money you make as well, so, if you pay a dollar, you must have made at least two after expenses.
> 
> Rental markets are price driven, if you can only rent it for $1400, and it costs you $1400, you're going to lose money in he long run due to vacancy and maintenance at least. Not to mention the fact that you're ignoring. The money you used as a down payment which isn't earning anything for you.


Yes, understand for sure..... But....In this $1400 is the principle of the mortgage included as expenses? I thought you can only declare the interest?


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## KelownaCondo (Oct 7, 2017)

My mortgage will be roughly $900 with interest

Lets say i rent the place out for $1400.... and these are my set expenses... to to make numbers easy.

1. Interest on mortgage - $400
2. Condo Fee - $150
3. Insurance - $100
4. City property tax - $120
5. Property managment - $140(10%)

This total is $910... 1400-910 equals $490. Just saying i have a renter first month lined up


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## heyjude (May 16, 2009)

I live in your area and I think your projected rent is totally realistic, assuming it’s a 2 bedroom condo. 

Repayment of the mortgage principal is not tax deductible, but interest is. Another issue to think about is whether to claim depreciation on your investment. This can save you tax in the short term, but you will have to repay it when you sell the condo. 

I presume that the strata bylaws permit rentals??


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## lonewolf :) (Sep 13, 2016)

I would sell it. I think prices of RE will trend lower with interest rates going higher. Make more money by selling rental & buying GICs with the money over the coming years is my thinking. Though I could be wrong with this speculation.


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## Just a Guy (Mar 27, 2012)

KelownaCondo said:


> My mortgage will be roughly $900 with interest
> 
> Lets say i rent the place out for $1400.... and these are my set expenses... to to make numbers easy.
> 
> ...


Your insurance is too high, it shouldn't be more than $20/month if that. 

Property managers usually charge the first month as well as 5-10%. 

You also have nothing for vacancy or maintenance.

If you don't count the principle, where does the money come from? Oh right, your pocket. Sure you can't claim it, but you do have to pay it. It's not like you can skip it, or get it back if you need it. 

Let's say you lose your job sometime in the future, where does his money come from?

Also, your still ignoring the down payment money. Money which could be earning you income, instead is sitting there guaranteeing the bank won't lose money if the property value goes down. Any good investor would include that money in calculating an ROI. 

Of course there are many ways to "fudge" the numbers to make your property look better than it is, but in the end you can't hide from your pocketbook. 

There are cheaper places out there you can buy if you look, things that could actually make you money even if there is a real estate correction, but it's your money.


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## nobleea (Oct 11, 2013)

The condo fee will for sure go up. Developers always start it off low to interest buyers. You can figure on it increasing anywhere from 25-65% within a year or two once the reserve fund study is done.

Your insurance is way too much as JAG mentions.

Assuming the increase in the condo fee is taken up by the decrease in insurance, you're barely breaking even before tax once you account for your principle payment. You have to pay tax on that $490, so you could be out 150-200$ a month. And that's not accounting for vacancies, inevitable repairs when tenants move out, upgrades required over time, plus some kind of return on your capital (the downpayment). Even at $2K a month rent its probably not going to interest any true investors.


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## KelownaCondo (Oct 7, 2017)

Thanks everyone for the information. This property was originally for myself. I actually only have had to give the builder the 10 percent. The other 10 percent has done very well for me in my trading account. 

In today's market it's impossible to buy a property for 230k and rent it out for 2k in my opinion. Oh well have to start somewhere.


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## Just a Guy (Mar 27, 2012)

Then buy a property for $100k and rent it for $1000. These properties don't come up very often, but they do come up. A good investor looks for opportunities and pounces on them, a desperate investor jumps in at any cost just to "get into the market", and a gambler throws money at the market hoping it goes up. 

I work with my realtor to find properties that will make me money, I come across a couple every year. Out of those few, I usually outbid the others interested and get a couple into my portfolio. Now, those properties may not be in downtown Vancouver, or gta, or even in the newest areas of Kelowna but they all cash flow for the long term.


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## KelownaCondo (Oct 7, 2017)

Just a Guy said:


> Then buy a property for $100k and rent it for $1000. These properties don't come up very often, but they do come up. A good investor looks for opportunities and pounces on them, a desperate investor jumps in at any cost just to "get into the market", and a gambler throws money at the market hoping it goes up.
> 
> 
> 
> I work with my realtor to find properties that will make me money, I come across a couple every year. Out of those few, I usually outbid the others interested and get a couple into my portfolio. Now, those properties may not be in downtown Vancouver, or gta, or even in the newest areas of Kelowna but they all cash flow for the long term.


Appreciate that. Something to spend more time on. What types of properties are you holding? Mainly freeholds? Thanks, any information helps.


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## Just a Guy (Mar 27, 2012)

I buy whatever I find that meets my investment criteria. You don't get to be too picky these days. Many of the ones I find now are foreclosures, estate sales, distressed properties, etc. They are also located all over the place. 

That being said, I avoid vacation properties, mobile homes, partial ownership, etc. Also, I look for places that may be more expensive, but cheaper on a per door cost...so a duplex may be worth $200k, a triplex $300k, etc. It also depends on the local market, a small town won't pay $1000/door so there's no point in buying a 100k property there.


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## OnlyMyOpinion (Sep 1, 2013)

From what you've said, it sounds like you plan to move to Kelowna in 2-3 years. In the meantime this condo will be closing within 6 mos.
We don't know your full intentions and how firm they are, so you'll have to decide. I've known people who bought distant retirement or recreational properties who in hindsight regretted it, so you need to be sure it makes sense in terms of family, lifestyle, etc. A person should generally rent and try out the area before purchasing.
You could:
1.Sell right away (pre or post-closing depending on condo terms). This will give you the most flexibility for decisions in 2-3 years. It depends in part whether you will make or lose money.
2.Alternatively, take possession and rent with the intention of moving into the condo yourself in 2-3 years. This assumes it is your 'dream place' and location. Renting would allow you to hang onto the place and cover most of its costs over the period. Renting may or may not turn out to have been a good idea.
If renting was working better than predicted, you could consider buying your own place in 2-3 years instead. If renting is a disaster and this is not your dream place, you sell a bit later and take your lumps.


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## KelownaCondo (Oct 7, 2017)

I'm only 26. No family. With my career it's pretty easy to find a job anywhere (not to be cocky) electrician. When I bought the place I was planning on moving right away but I have a pretty awesome job here. Just looking forward to the westcoast lifestyle. 

Camp jobs are starting to pop up out west more and more. 

I could be moving there next week or next year. Everything is up in the air. Maybe I will pull some equity out of my primary place and buy a second property of I get out there sooner. 

Interesting hearing from everyone. Thanks


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## Just a Guy (Mar 27, 2012)

You may find a hard time finding a property manager for only one property. It's a lot of work, so they tend to want to have multiple units to manage to make it worthwhile.


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## KelownaCondo (Oct 7, 2017)

Just a Guy said:


> You may find a hard time finding a property manager for only one property. It's a lot of work, so they tend to want to have multiple units to manage to make it worthwhile.



Have that locked down already Sir.


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## twa2w (Mar 5, 2016)

KelownaCondo said:


> . With my career it's pretty easy to find a job anywhere (not to be cocky) electriian


You may find jobs harder to come by in Kelowna area than you think.
Kelowna is very attractive place to live and still inexpensive compared to Vancouver etc.
Wages are often far less than elsewhere because employers can pick and chose. I know more than a few people who have looked into jobs in Kelowna and were shocked at the wages offered.
CA's who were offered 1/2 to 2/3's of what they made in Calgary. Journeyman plumbers offered 15 - 20.00 hour to start. If you didnt take it, there were 2 or 3 more people lined up behind you who would. Obviously non unionized but union jobs there are scarce.
Those are just a couple of examples. Also know a few folks living in Kelowna who work in the trades in Fort Mac et al because no jobs in Kelowna for them unless they work for peanuts.
Mind you this was a few years ago so maybe situation has changed and hopefully you will waltz into a job.

In regards to your condo - if your plan is to move to K in a few years, then you may want to rent the condo out even if it is barely breakeven or a small monthly cashflow deficit.
If you intend it to be an investment then that is a different decision and you have to pay closer attention to cashflow, taxes, etc. It may be better to sell and take your capital gain and find another property, perhaps closer to home, that cashflows better.


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## KelownaCondo (Oct 7, 2017)

I was actually in Kelowna talking with a few companies recently. Couple of my friends that live in the okanagan work in the oil sands. That's what I would actually prefer to do at the start. I know the wages are lower and already looked into all of that. I also have some side ventures that supplement my income to keep things afloat. I don't think I will be selling it. Good place to stay while I get everything sorted out within the first couple years when I get there.


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## heyjude (May 16, 2009)

twa2w said:


> You may find jobs harder to come by in Kelowna area than you think.
> Kelowna is very attractive place to live and still inexpensive compared to Vancouver etc.
> Wages are often far less than elsewhere because employers can pick and chose. I know more than a few people who have looked into jobs in Kelowna and were shocked at the wages offered.
> CA's who were offered 1/2 to 2/3's of what they made in Calgary. Journeyman plumbers offered 15 - 20.00 hour to start. If you didnt take it, there were 2 or 3 more people lined up behind you who would. Obviously non unionized but union jobs there are scarce.
> ...


Apparently it has changed. At least, the job market is volatile. 

https://www.kelownanow.com/watercooler/news/news/Kelowna/Kelowna_ranked_1_job_market_in_Canada/


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## twa2w (Mar 5, 2016)

Interesting to read the comments on the link you posted.
Remember too that Kelowna is a relatively small market compared to most of the names on the list. So the absolute number of jobs still likely low. And it doesn't appear wages have increased much, or need to, to attract people.


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