# What is CMF's members overall feelings on RE Investing?



## captain charisma (Mar 10, 2010)

I know the yields are typically less than other forms of traditional investing etc but with Canadian RE prices higher than ever before is the majority feeling here on CMF that RE investing is less appealing than ever before? 

Or do you see it as win if you look at it long term, I do realize it is very uncommon to get a cash positive situation and even when you are cash positive it can be as little as $100-500 a month once you factor in ALL MONTHLY/YEARLY EXPENSES. I guess the real pay off comes when you sell (mortgage free) but then comes the capital gains etc....

I am in a position personally where I have disposable $$$ (approx 70K) and with having zero experience with investing but some experience in RE I feel I am at the crossroads in terms of what to do with my money. 

I would love to hear everyone's bullet form (or lengthy responses if your in the mood  ) opinions on Real Estate Investing if you care to share. 

Thank You.


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## FrugalTrader (Oct 13, 2008)

Rental real estate is a business, not a passive investment. However, if you are good at dealing with people (tenants), then it might work for you. 

Why not find a property that cash flows and give it a shot to see if it's for you? I did it for a few years and discovered that the rental real estate business was not a point of strength.


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

Wouldn't it be easier for you to simply take the time to read one or more of the hundreds of threads that already exist here in CMF? Seriously, there's a lot of good information there that we all took a lot of time to write out.


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## crazyjackcsa (Aug 8, 2010)

It can work, but is nowhere as easy as it seems. The best way would be to make yourself a tenant. A duplex or triplex is the best bet. You're always on site and you don't carry two mortgages.


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## marina628 (Dec 14, 2010)

TMR is correct there is plenty of opinions in the Real Estate Section.My husband and i are mid 40s and we have 5 rentals now but we bought fairly new homes with the long term in mind.Currently we have net proceeds of $4000 -$6000 per property but we have one property we bought in 2010 which needs a complete basement .We rent upstairs month to month and my husband has been slowly working on the basement to build a 2 bedroom suite which we hope we will be able to rent sometime in 2012.This project has made it so we have not had to pay income tax yet .Our plan is to start selling them off in year 10 and repurchase newer homes to avoid ever having to do the big ticket stuff like windows and roofs.I would like to eventually have 10 rentals so when we retire in Caribbean in 2021 We should have $10,000 or so after tax income each month.


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## LBCfan (Jan 13, 2011)

There is more to RE than residential. We own our own home, some REIT units and some farm land. I wouldn't want to be a residential landlord since (at least to me) it's more a job than an investment. YMMV.


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## jcgd (Oct 30, 2011)

The way I see residential real estate (if you feel like being a landlord) is you get a decent return on your money, assuming you have positive cash flow, etc. and in the end you get a free house. I don't really see how any other investment does that.

If you feel like taking some risk you can use built up equity every five years or so to get another house. Assuming you are decently good at it, and have neither bad, nor good luck, an initial down payment of say $40-60,000 can end up buying you 10 homes and your original return on the original cash.

Either I'm missing something huge, or it kinda is a miracle investment.


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## jcgd (Oct 30, 2011)

I thought I'd ad that I have full intentions to get into real estate investing, but two very important things have to happen first:

The market in Canada needs to cool off. Or I need to be somewhere that the market hasn't gone crazy. Any major city west of Toronto right now is a money trap, IMO. 

I need to get my finances in check. I need to have a year's salary in the bank, and a substantial emergency account before I'm willing to risk owning a house. 

IMO, owning a house is a liability, not an investment. At best, under normal circumstances you should be only making the inflation rate on the price of your house. Yes more people are moving here all the time, but if that forced house prices up (by lack of land) every house in the US would be astronomically expensive, considering you'd have 5 people fighting over the same amount of land for every one of us. 

On top of that, your house depreciates, breaks down and you pay for it twice with the interest you pay. Plus it's illiquid and holds you down. 

Having renters paying the mortgage and providing a return on your original investment is a whole other ball game. I will probably rent, and have investment properties. I'd only ever buy if I could pay it off in less than 15 years and have well over 20% down.


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## Cal (Jun 17, 2009)

I can get a better return on my money than RE at this time.

I am not calling for a correction, crash or anything like that, in current RE prices, however most people feel today's RE prices are crazy. Whether that translates into more craziness or a decline in valuations, we will have to wait to see.


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## kcowan (Jul 1, 2010)

OP
Where and what kind of RE are you considering?


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## marina628 (Dec 14, 2010)

Being a landlord not for everyone ,we have NEWER single family homes with exception of one 30 year old 1600 sq ft bungalow which we are in process to build a basement apartment .We are getting $1400+ on the top floor and expect to get $1000+ for bottom.The people I know who fail in these ventures are usually underfunded and will take the first tenant they can get their hands on.We buy single family homes as it seems to be a demand and there are many people with good credit and stable jobs looking for homes.I really do not like two unit houses ,we have spent money on things like insulting the ceiling/floors,separate laundry for each unit and the house has a garage which the top floor tenant has but the driveway is wide so basement will get other side to park.These are usually the conflicts you get with tenants.I will update when we rent the basement in 3-4 months how it goes


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## captain charisma (Mar 10, 2010)

kcowan said:


> OP
> Where and what kind of RE are you considering?


It would be a residential property, I currently own and live in a townhome which is mortgage free, I own another condo with over 300K owing in mortgage. 

I have considered either buying another 2 bedroom condo here in the Fraser Valley, B.C. OR maybe better yet a free standing home that comes with a basement suite to rent out. (I would live atop of course)

All the while hanging on to the current townhome renting it out, and also renting out the other condo. 

In other words, 3 properties, 2 with mortgages and 3 rental payments. 

Not having really any knowledge or experience with investing through other means, I feel my strength is with RE as at least I have experience with that. 

Forgive me in advance for asking for everyone's time and advice but I do also have some extra $$$ (70K to be exact) to invest which is why I feel I am at the crossroads with what to do with it. How hard is it to get into and learn more traditional investing (stocks/bonds etc) without losing your shirt as a rookie? 

Would you follow my RE idea? (see above) or would you take that 70K and put it somewhere else and how & where? 

The other school of thought as CMF member "Cal" and others mentioned is that RE is simply way too high right now. Nobody has a crystal ball but on that note should I just continue to bank cash and wait until things soften up? 

The other argument being the difference of price is less costly than the greater cost of opportunity of not seizing it now! 

I am so confused!! Any advice/input is greatly appreciated. 

(Those that mentioned to simply look up past threads, you are right, I will. My apologies but I guess I am looking for an answer directed at my personal situation after all)


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## andrewf (Mar 1, 2010)

Do you really want to have exposure to the lower mainland real estate market of >100% of your net worth? BC Lower Mainland looks like Nasdaq 1999 to me.


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## jcgd (Oct 30, 2011)

andrewf said:


> Do you really want to have exposure to the lower mainland real estate market of >100% of your net worth? BC Lower Mainland looks like Nasdaq 1999 to me.


This is kinda my view too. But if you are going to do it, I would avoid condos. Everyone buys them because frankly, that's all they can afford. But I see the condo fees as the real risk. You have no control over them and they can end you if something major happens. 

Everything is a mess right now. Nobody knows where anything will end up. If you want to do stocks, but don't really know what to do, a couch potato portfolio is probably your best option. You essentially try to own the whole world, or Canada, or whatever by buying indexes, etc. The general idea is to keep your fees as low as possible so you get the average return of the market. Etf's work well for this. The fees on mutual funds are usually much higher.


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## Young&Ambitious (Aug 11, 2010)

I wouldn't suggest putting all your eggs in one basket. I'd use that money to (a) set aside money for an emergency fund or some other short-term goals (b) max out TFSA and RRSP. Have a professional financial advisor manage your money in a low-MER mutual fund/ETF etc etc (c) keep aside some $ for you to use in the markets if you so wish as "play" money, this is investment money that you would be okay with losing in the stock market potentially.


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## Causalien (Apr 4, 2009)

captain charisma said:


> It would be a residential property, I currently own and live in a townhome which is mortgage free, I own another condo with over 300K owing in mortgage.
> 
> I have considered either buying another 2 bedroom condo here in the Fraser Valley, B.C. OR maybe better yet a free standing home that comes with a basement suite to rent out. (I would live atop of course)
> 
> ...


Hey, I am in the process of expanding into a serious landlord, you are in the process of expanding into investing. How about we do a sit down and pick each other's brain?


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## LBCfan (Jan 13, 2011)

It's easy. Being a residential landlord is great (you get to be the Lord). But shyte happens. Then you are the "other guy". Then bad stuff happens. But it won't happen to you, so do it.


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## Berubeland (Sep 6, 2009)

I'm in favour of real estate investing 100%

There is a lot of money to be made if you do it properly and there are many ways to do it 

Having said that... many people don't do it properly, don't understand what they are getting into, and get into big trouble. 

This is like any business, it's damn hard to make money and you work for every penny you make. 

For example, owning a corner store might seem like an easy business as well, you rent a space, fill the shelves then wait for customers. Easy except if you talk to people in the business, there are a lot of things you never ever thought about. My friend who owns a daisy mart has been waiting 5 years for a lotto machine. 

Being a landlord is similar, you need to know about 80 different "trades" lawyer, plumber, roofer, paralegal, management, getting along with people, knowing when to be mean and much much more.


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

Berubeland: the specuvestors (I love that term you coined) will only read the sections of your post that support their POV. As Harold said in another thread, the RE industry is all too happy to egg people on to RE, branding all of it "investing" when in many cases it's anything but. I really like that other long post you wrote in the past couple of weeks. You should add that to your sig file so that everyone will read it. Too many specuvestors out there these days and we see them here in CMF constantly.


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## hboy43 (May 10, 2009)

Hi:

When one looks at all the metrics and facts trotted out: Canadian personal debt levels, the buy to rent ratio (or whatever it is called), number of years annual income to pay for a house, really low interest rates etc. I just don't see how a reasonable person can think we are closer to a buy low than a buy high situation.

Then there is the PITA factor and the legal environment (at least in Ontario) where the tenants have all the rights and the landlord all the responsibilities.

Makes no sense to me, especially when 4% plus dividends are available all over the place from decades old companies selling stuff that is needed.

hboy43


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## kcowan (Jul 1, 2010)

OP
I would wait if I were you. Of course, I have been expecting a correction in the lower mainland for 3 years so I am not your best source of RE forecasts. But the main thing is not not let cash burn a hole in your portfolio. We sold a townhouse in Richmond in 2008 and the proceeds are still in cash equivalents. The problem was that the HOA would not permit another rental and we did not want to move from West Van where we rent.

So beware getting in a position where your assets are under control of an HOA.


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## andrewf (Mar 1, 2010)

The only reason people like it so much is because they can leverage themselves up to the gills.


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## Cal (Jun 17, 2009)

OP, you mention a concern regarding losing your shirt with equity investments.....which nobody here wants. And this forum is a great source to gain knowledge.

Are any of your investments diversified outside of RE? Aside from the 70K which I can only assume is in a 'high' yield account.

I wouldn't want to have everything in 1 sector...thats all.

For a rookie, if you are looking for some diversification, and financial investments, start w some ETF's and follow some of their holdings.


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## Causalien (Apr 4, 2009)

I just noticed that all the houses that were on sale throughout the year now have a "SOLD" sticker on their sign. This happened in the span of 1 months and the houses all sat on the market throughout the summer with no sale. By all I mean about 20 on the route I traveled.

Is anybody noticing the same thing in their area?


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## Sherlock (Apr 18, 2010)

No, I've noticed no difference in my neighborhood. Probably just a coincidence.


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## marina628 (Dec 14, 2010)

Lots of sales in my area ,one had multiple offers on it which is strange for our area ,nothing special either 4 bedroom detached maybe 1800 sq ft with double garage.


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## hystat (Jun 18, 2010)

imo, the biggest drawback with real estate as an investment, is the cost of liquidating it, and time to liquidate. In some markets, selling can take months or years. 
If you want to relocate, having multiple properties is no fun. You need to have fairly deep roots in a community and be pretty sure you are not leaving anytime soon. Not a good idea to be a long distance landlord on a residential property.


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

Good post by hystat. I concur. Selling property, even in the GTA can take months/years due to all the competing units on the market. And after the RE and other middlemen take their cut out of your profit it's not as profitable as it may seem.


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