# Seeking advice on 1st Investment Property



## netwerkassist (May 22, 2017)

hi forum members!

I would like a chance at gaining something extra for retirement which is in the next 10-15 years and had my eyes on the rental investment market. There are a few properties which have ok- not bad cashflow (up to $300 per month -8-12% CAP Rate) and I have been pre-approved for up to 220k. A few places like in Windsor Ontario fall into that range. I don't have a HELOC option (as when I renegotiated my new 5 year mortgage term 18 months ago they instead gave me a basic renewal but with a really low variable 2.11 on my existing home. I was thinking of using a line of credit for the down payment of approx 35-40k as I don't have much available in savings towards a down payment and didn't want to break open my rrps's. My plan was looking at paying back up to 5k per year on the down payment (LOC). Of course I would need some contingency, and want to know if this still could be a good approach and anything else I need to factor in and to not over extended myself.

Appreciate Opinions and Thoughts

thanks


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## TomB16 (Jun 8, 2014)

You're in Vancouver and you're considering investment property in Windsor?

Bad idea.

- management and maintenance will knock you into the red from day one
- no local access to troubleshoot the property or your management
- no local knowledge in selecting the property or gaining comfort on the future of the Windsor market


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## Just a Guy (Mar 27, 2012)

You may want to read up on Windsor as well...it's not exactly Vancouver by any stretch of the imagination. The main employer is the casino. Very high unemployment, very high crime. Remote management is difficult, most property managers don't want to deal with a single unit. 

Finally, 10-15 years is pretty short term thinking for real estate. The breaker needs point is usually 7-10 years. Your window is getting pretty closed.


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## ahzamvr (May 19, 2017)

investing in real estate business is good all time but depends on where to invest and what is the chance to get back all...


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## james4beach (Nov 15, 2012)

Do those cap rate figures really include all expenses and fees you will face? How about your cost to travel between BC-ON ? That trip isn't cheap.

Agents tend to misrepresent cap rates:
http://realtyhub.ca/paul-kondakos-blog/2012/8/8/the-cap-rate-bait-and-switch-dont-fall-for-it.html


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## Lost in Space 2 (Jun 28, 2016)

As part of your research I'd suggest joining a landlord Facebook group. There is a great one for Ontario landlords and sure for your area. Secondly check out http://landlordrescue.ca/ as well as her excellent twitter feed. There is an author on Canadian Money Saver who blogs about real estate, unfortunately I let my subscription expire so can't find it but it may be worth getting a subscription to find her book

A while back my niece asked me about real estate investing this is what I told her

There are three aspects to being a landlord

1.	The actual job of being a landlord
2.	Cash flow management
3.	Taxation

Being a landlord

Talk to people who’ve been landlords and ask them what they’d do different next time. If you ask my sister in law she’d say best investment ever, every month her tenant deposits 2 grand into her account to be spend on whatever she wants! Ask my brother and he say never again, too much work. For your parents it was a rough start but it’s work out very well for them now. Uncle Hannes was a landlord and sold the property ask him why he didn’t keep it. 

Questions to ask:

•	cash flow management
•	tenant problems
•	rent increases
•	upkeep and maintance
•	ACB Adjusted Cost Base - a nasty bit of tax code!!!!
•	buying with equity rather than cash
•	grandfathering - oh my Nano and your parents learned that one the hard way


Also as opportunities arise ask the bank manager what kind of mortgage are best, do they know any real estate investors. The whole thing is everybody talks and nobody listens. You’d be amazed at what people are willing to share if you give them half an ear. 

Would be interesting to talk to Susan Halman, they made millions off real estate. 

Cash Flow Management

www.ryanprice.ca/

This is where most newbie landlords fail. They end up subsiding the tenant. His calculators will help you eliminate 98% of the properties you look at. If you find one where the numbers work than go for it. I would go as far as to email various real estate agents telling them you’re in the market to buy an investment property and this are the numbers you need. Let them do the work. 

Taxation

Again most people look at the property ONLY from the cash flow point of view Landlord Income minus expenses = profit loss. Government: Gross income less DEDUCTABLE expenses = profit loss
It’s a very important distinction. 

Here’s an example from our property in Frankfurt

Gross income: 6792
Mortgage: 6060
Condo fees:	1682
Taxes 300
Profit/Loss:	1740 loss

Government

Gross income: 6792
Interest 3000
Taxes 300
Taxable profit	3492

You can see how even a cash flow negative property can be profitable from a taxation point of view. Obviously Taxation in Germany is different from Canada but the same principal apples no mater where you live. 

Taxation part Duex

To quote Garth again Most people don’t understand how they’re taxed or what to do to minimize the impact. They also don’t realize how the tax system is skewed to ensuring the rich stay that way. This is something I’ve emphasised to Martin and Mini many times, as he’s going to be a high income doctor (I’m guessing in the 200,000 range) it’s vital that he understand this point. 

It would take another long email to explain but for 2015 I’m looking at a profit of around €10000 on our investments this year. Taxation would look like this

Taxable profit	10,000
Healthcare 2400
Income taxes	3800
Net to me 4800

The government makes more money than I do, adding insult to injury is I have to pay that out of pocket as the cash flow the properties generate have to pay the bills. 

BUT by understanding the German tax system I’ve been able to turn €10,000 profit into a 5000 euro loss, meaning the Finanzamp at the end of the year will send me a cheque for 2500€. 

The holy grail of any investment is to create cash flow which can be used to enhance your family’s life while not attracting any taxation.


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## Eclectic12 (Oct 20, 2010)

With all due respect ... investing in anything needs a good plan as well as following it.

Whether one loses with RE or stock - one loses.


Cheers


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## netwerkassist (May 22, 2017)

*Roller Coaster*



TomB16 said:


> You're in Vancouver and you're considering investment property in Windsor?
> 
> Bad idea.
> 
> ...


I can't say I will follow the advice you have mentioned, but Thank you for your brutal honesty. Sometimes in life you just have to try somethings out before its 'light out'.


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## netwerkassist (May 22, 2017)

Just a Guy said:


> You may want to read up on Windsor as well...it's not exactly Vancouver by any stretch of the imagination. The main employer is the casino. Very high unemployment, very high crime. Remote management is difficult, most property managers don't want to deal with a single unit.
> 
> Finally, 10-15 years is pretty short term thinking for real estate. The breaker needs point is usually 7-10 years. Your window is getting pretty closed.



Thanks for your input. It's not quite 'lights out' and I thank you for your response.


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## motl (Mar 3, 2014)

Why would you want to have a rental in a random city across the country, for which you'd need to borrow money just to make the down payment?

This screams RUN AWAY honestly.


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## naysmitj (Sep 16, 2014)

You may want to expand your search to include looking in Niagara.


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