# Potential new landlord!



## MoneyChase (Aug 31, 2013)

Hey,

As some of you may know from reading my online money diary in the other thread, I have saved a good amount of change for my age. I am now thinking of investing in a rental property. However, currently where I live, bachelor apartments are sold for approx. 100k. Rents, however, are anywhere between 550-700/month ++. 

Do you think it be a wise move to use almost all of my money towards an investment property? No mortgage, as it would be a strict cash deal.

Some mock expenses would be:
-Condo fees($80/month)
-Property Taxes($150/month)
-Rental insurance($100/month)
-Miscellaneous expenses($100/month) 

Again, these are mocked up expenses. I know the hard number for condo fees are $70/month and $100/month for property taxes(unit I looked at), but I like to add a little extra cash. I guess you could call it being cautious! lol

Assuming I charge $600/month rent ++ with the expenses that I have provided you, I would currently be around a net income of $2,200/year. To me, this would cover up to 3 1/2 months of vacancy, A new fridge or stove, etc. If no miscellaneous expenses occur for a whole year(Which I do not expect to happen!) , I could save $1,200, which would now put me at a net of $3,400/year.

What are your thoughts? Coming from someone who is very new to the whole landlord world!

Thanks =]


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## Addy (Mar 12, 2010)

Your numbers sound okay, if you don't know already, find out how big their contingency fund is. If it's small then you have to set aside $$ for major expenses which will be shared amongst owners, such as roof repairs, repiping the building, etc etc... anything that is commonly held areas would be shared amongst all owners.

Also, what is the vacancy rate in the area? And will you be paying an accountant to do your taxes now, to maximize your write offs? The accounting fees should be worked in there as well, they won't be much for one condo but still, a consideration.


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## Addy (Mar 12, 2010)

And is the water metered? I'm not sure if you can have the tenant pay for metered water where you are, but if not and it's metered, that's an additional expense.


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## MoneyChase (Aug 31, 2013)

Water/sewer is incorporated into the monthly condo fee - The tenant worries about heat and hydro. Something I'll need to find out is if a tenant intentionally ran the water 24/7, it would be obviously noticeable, so would I ultimately be the liable one, since I am the owner of the unit and I would be paying the condo fees with the tenants rent?

Also, I'm not sure on how to determine how much money would have to be in a contingency fund to class it as 'healthy'. Is there a way to measure this? Obviously if you own an apartment in a five unit building with a $50,000 contingency fund, it would go a lot further then say a twenty unit building with the same amount in a contingency fund if a major repair was needed.

As for taxes, I currently do my own taxes as they are very basic. With a rental property, I would probably need a professional, which would cost me ?? Unsure =] But do you think the amount of write offs in a given year could help offset the cost of hiring a professional to do my taxes? maybe even cancelling each other out?

Thanks!


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## Just a Guy (Mar 27, 2012)

From my point of view, this sounds like a terrible investment. First off look at your return. Invest 100k, get back 2.2k if you are lucky. 

Second, any condo which includes utilities has to charge more than $80-100/month or they are running a defecit and will be forced to do a cash call. That number would barely cover the water, let alone the management fee, the condo insurance (for the corporation, not the stuff you buy), the maintenance and the reserve fund. 

You are not going to do well as an investment, making money in real estate requires leverage and cash flow. Where do you hope to make money? Increased property value in an overpriced market?

Do more research before you lose your shirt.


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## SpendLessEarnMore (Aug 7, 2013)

In a perfect situation you'd get $3200/year on a $100k investment which is a 3.2% return before taxes. Your realistic expectation is $2,200/yr which is 2.2% return before taxes.

And what's the potential for the apartment to appreciate? Did you also factor in the lawyer and any land transfer fee if applicable. 

Don't think you'd need an accountant to do a single rental property rental income tax sheet. They just ask you to fill in gross rental income for the year and the expenses for the year to get your net rental income.

But with the potential for max 3.2% return if you don't have any other income and the headaches that come with land lording I'd pass on this one. Just takes one bad tenant to make your life a living hell.


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## Chris L (Nov 16, 2011)

Buy a REIT at 5%! Are you nuts, your numbers are terrible. Heck and high interest savings account will give you 2.5% ROI and you DON'T HAVE RISK OR TO LIFT A FINGER. 

Run away fast from this "investment."

Sounds like a make-work-project.


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## Jon_Snow (May 20, 2009)

Artis pays me almost 8% - H&R 6%, InnVest 9%.... boggles my mind all the young, wannabe landlords who frequent this thread.

Don't get it. But then again, I may rent someday in my life, so I guess we need people to provide this service. Go for it!!!


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

Sounds like a lot of work and liability for a mere $3000 profit per year. Seems to me all those middlemen you mention are the ones making the true profit on your "investment". Thumbs down from me.


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## Rusty O'Toole (Feb 1, 2012)

Pass. With that kind of rental income you want to be buying for under $50,000 a unit which is obviously impossible. Look for a better opportunity.


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## dBII (Mar 12, 2013)

Is that the same Artis that went from $16.50 to $5 a share in the "Great Crash"? I respect your allegiance to REITs, but they are tied to the financial markets as much as, well, the financial markets. If we experience the same crash again, my real estate value may crash, but the units will still be rented and will still deliver that 8% ROI that I am getting now. I am looking at this in simplistic real-value terms, but it helps me to sleep at night since I have control. I just got back from one of my rentals. I did my "due diligence" maintenance inspection on the w/e and so I was out there all day yesterday making little repairs 'n stuff. It was actually kind of fun. No rush, I'm my own boss even when I'm in the crawl space sweeping unhappy spiders out. After, there was a cold beer and a sense of accomplishment and I felt pretty good.

I have considered leveraging the value and buying more, but, I can net about $2k/mo, so why bother with the stress?...life is indeed good.


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## andrewf (Mar 1, 2010)

The housing market became pretty illiquid during the crash as well. REITs remained liquid, but their prices dropped significantly. Overall, I think it's better to have a liquid asset. If you needed money pronto and all you had was a house, you may not have been able to get any cash in a timely fashion.


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## Ihatetaxes (May 5, 2010)

Jon_Snow said:


> Artis pays me almost 8% - H&R 6%, InnVest 9%.... boggles my mind all the young, wannabe landlords who frequent this thread.
> 
> Don't get it. But then again, I may rent someday in my life, so I guess we need people to provide this service. Go for it!!!


Reits are currently the biggest losers in my portfolio. 

I'm not a seller but also not as pro-Reit as some.


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## Jon_Snow (May 20, 2009)

I didn't really get into REITS until their big drop... Actually I'm up on my REIT allocation so far... And collecting sweet distributions as well. It's all good.


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## Spudd (Oct 11, 2011)

I wasn't so lucky, I decided to allocate a bunch of my portfolio to REITs in May, literally a week or so before they dropped 20%. Still holding for the long term, though.


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## Cal (Jun 17, 2009)

Even if you net $3400 as stated above.....wouldn't you earn more if you invested the $100,000 in equities. That would be a 3.4% return....I wouldn't be happy with that.


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## dbw (Dec 8, 2011)

I just got into rental property investment myself as I've done some research myself and concluded that rental property is a great investment.
Several things that I suggest:
1) Before purchasing any property, make sure you have a home inspection done by a professional to avoid having major repairs down the road.
2) If it's a condo, make sure the lawyer thoroughly review the status certificate to ensure they have good reserved fund and no plan of any major expenses that could increase the condo fee. I would suggest newly build condo instead of older ones.
3) The most important thing for rental property that I suggest is using an agency or really do thorough checks because "tenant from hell" can cause you a lot of time & head aches as well as can cost you a lot of money.
4) Spend money to have a good lease agreement prepared by a Lawyer to ensure that the Tenant can't cause you any trouble.
5) In your lease agreement, make the Tenants be responsible for obtaining their own content insurance while you only need to obtain insurance for the structural building.

Even though I think that I may have inherited a problem tenant in the property that I just invested in, I still think rental property is a good investment as long as you're lucky enough to get decent tenant.

Good luck.


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