# Buying another condo in my building to rent out



## frugalmini (Feb 19, 2011)

Hi, Everyone

I'm just thinking out loud here and I'd like to hear your opinions on this. 

I bought a condo in the summer, so far I love it. I talked to my neighbours and some have been living here for many years, and they love the building and the area. I'd like to buy another condo in my area, could even be in my building. I plan to rent it out at the begining, and when my parents get older and need my care, they could live there.

I run the numbers on the rent for a 2 brd apartment in my area and consider all the expenses (condo fee, mortgage, tax, reno, and 5% vacancy rate) it could probably be break even or with a little positive cash flow. I'm not sure if it's a good idea to buy two condos in the same building, or it's better to be in a different condomium? And I don't know if i miss anything in the picture. I don't plan to jump in it right away, but I might do in a year or two. 

I really appriciate any opinions from you. Thanks in advance!


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## kcowan (Jul 1, 2010)

I think investing with the prospect of breaking even is a bad idea. And counting on your parents as renters is probably risky.

Keep your powder dry. There may be better uses for your TFSA/RRSP money.


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## Just a Guy (Mar 27, 2012)

Buying into a building you know is a good idea if you are involved. You'll know about the finances, any plans for special assessments, etc. 

That being said, if it just breaks even in these low interest times, it's probably not a good investment. As interest rates rise, so do your expenses, and quite rapidly at that. 

As for renting it to elderly parents, is it set up for their needs? All one, ground floor level, high toilets, bars for the shower, etc.


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## frugalmini (Feb 19, 2011)

Thank you, guys. Really appreciated.


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## Sherlock (Apr 18, 2010)

Another problem is diversification, if something happens to that building (eg it needs some expensive repairs and each owner is asked to cough up thousands of dollars) you will be accountable twice.


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## rd_aaron (Jun 24, 2011)

Sherlock said:


> Another problem is diversification, if something happens to that building (eg it needs some expensive repairs and each owner is asked to cough up thousands of dollars) you will be accountable twice.


Bingo!


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## MrMatt (Dec 21, 2011)

Depending on your province you could have a problem with restrictions.

I've heard of condos that have rules that would violate the tenant protection laws, which could get you in a sticky situation.
Anyone have experience with this?


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## Chris L (Nov 16, 2011)

I can't wait to scoop up some good deals in RE in the next few years!


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## financialuproar (Jan 26, 2010)

frugalmini said:


> Hi, Everyone
> 
> I'm just thinking out loud here and I'd like to hear your opinions on this.
> 
> ...


Keep in mind I don't know your entire financial picture, so forgive me in advance if I make some wrong assumptions.

I think your plan has 3 major weaknesses:

1. Way too much of your net worth would be tied up in condos in whichever Alberta city you're from.

2. Investments that use a high amount of leverage (assuming you'd be financing at a 80% loan to value ratio) are very risky. If the value of the condo falls 10%, you'd lose half your original investment, not to mention losing money on the condo you already own.

3. Canada is currently in a massive real estate bubble. If you'd break even on cash flow (at record low rates) then you've got to make money when the unit goes up in value. I don't think that'll happen.

There are certainly times in the cycle to buy real estate. This is not one of them.


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