# Buying a townhouse to eventually keep as a rental



## Freedom45 (Jan 29, 2011)

My work has recently relocated me to Edmonton, and as a result, I'm looking to purchase a new home.

I'm entertaining the idea of purchasing a brand new townhouse (3bed, 2.5 bath, double attached garage, high end finishings) for ~$315k to live in for 3-4 years, and to keep as a rental property once we've moved out of it (hoping to build a home 3-4yrs out).

Rough crunching numbers, would have ~$1,700 per month, including mortgage payments, condo fees, property taxes and insurance in expenses. Comparable units are currently renting in the $1,900-2,200/mo range, plus utilities.

We would be planning to keep the townhouse as a rental property long-term. It appears it could flow roughly $200-500/mo (not counting maintenance/repairs), while having someone else pay down the mortgage.

Thoughts? Comments?


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## nobleea (Oct 11, 2013)

Welcome to Edmonton! What area are you thinking of? That price seems reasonable, I assume it's somewhere outside of the Henday. Have you taken in to account the income taxes due? You'd have taxes due on your net cash flow as well as on the principal repayment. That could amount to $300/mo in taxes depending on your downpayment amount, mortgage rate, rent, and marginal tax rate.
Property taxes in Edmonton almost always go up faster than inflation. Condo fees in a new townhouse shouldn't change much.
Renters are never as kind to your property as you are, regardless of how much to screen them. Figure new flooring required every 5-7 years.


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## none (Jan 15, 2013)

I think this is a terrible idea.


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## IFITSTOBEITSUP2ME (Mar 6, 2015)

Anyway you can stretch to buying a "non-condo" fee property but most importantly close to economic centre or travel to it? That way you could likely get slightly higher rent and the slightly higher insurance and property taxes still won't equate to as much as the condo fees might be, and tenants don't pay extra for them typically! Been there done that, and preferred owning properties with no condo fees that were out of my control on rising or special assessments. Don't think a retainer wall, major septic problems, or something else can't occur just because it's a townhome versus an apartment - seen it happen to folks. Also in years gone by have seen low condo fees at builder time, but within a year after possession seen them go up exponentially to meet the reserve fund studies etc. 

We just sold (possession 11 Jun '15) our non-condo 2 bed 5 level split Townhouse for much more than condo-fee equivalent ones in Calgary - rental rates with increases since 2008 purchase saw our mortgage pay down mortgage substantially. We are getting ready to offload all our fixed assets to become nomads for several years in our retirement. 

When it comes to property ownership go into it with the long term goal picture in sight always. Just treat it as a bonus if you miraculously hit the right market timing for a huge move up quickly and can sell at a profit in a short time frame = don't count on it though! We've done both but always go into it long term minded when buying, and have sold if gone up exponentially at time of possession or within a couple years to capitalize, then sit back and wait for the next pullback before rebuying.

Just saying FWIW and in case it helps. For us personally, no other investment has given us the returns we've experienced from buying, renting, building and selling properties for over 3.5 decades.


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## banjopete (Feb 4, 2014)

I'm currently looking around the city for a home of our own in Edmonton and have seen a number of duplexes and triplexes for reasonable prices in relatively central areas compared to where I'd expect you're looking for new builds. It might be something worth considering given your time frames. Welcome to the city as well, the city's catch phrase "it's not that bad" is my favourite saying when I talk to my family and friends back home in Vancouver!


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## Freedom45 (Jan 29, 2011)

nobleea said:


> Welcome to Edmonton! What area are you thinking of? That price seems reasonable, I assume it's somewhere outside of the Henday. Have you taken in to account the income taxes due? You'd have taxes due on your net cash flow as well as on the principal repayment. That could amount to $300/mo in taxes depending on your downpayment amount, mortgage rate, rent, and marginal tax rate.
> Property taxes in Edmonton almost always go up faster than inflation. Condo fees in a new townhouse shouldn't change much.
> Renters are never as kind to your property as you are, regardless of how much to screen them. Figure new flooring required every 5-7 years.


Looking at the Ellerslie/Summerside area, so yes, South of the Henday.

I had not factored in income taxes, no, but will add them into my consideration. Thanks for that. FWIW, expected downpayment will be 5%, at a variable rate of prime -0.75% (2.10% currently).



none said:


> I think this is a terrible idea.


Care to elaborate? I'm not set on doing it, hence asking for opinions here.



IFITSTOBEITSUP2ME said:


> Anyway you can stretch to buying a "non-condo" fee property but most importantly close to economic centre or travel to it? That way you could likely get slightly higher rent and the slightly higher insurance and property taxes still won't equate to as much as the condo fees might be, and tenants don't pay extra for them typically! Been there done that, and preferred owning properties with no condo fees that were out of my control on rising or special assessments. Don't think a retainer wall, major septic problems, or something else can't occur just because it's a townhome versus an apartment - seen it happen to folks. Also in years gone by have seen low condo fees at builder time, but within a year after possession seen them go up exponentially to meet the reserve fund studies etc.
> 
> We just sold (possession 11 Jun '15) our non-condo 2 bed 5 level split Townhouse for much more than condo-fee equivalent ones in Calgary - rental rates with increases since 2008 purchase saw our mortgage pay down mortgage substantially. We are getting ready to offload all our fixed assets to become nomads for several years in our retirement.
> 
> ...


Thanks for your feedback and suggestions.



banjopete said:


> I'm currently looking around the city for a home of our own in Edmonton and have seen a number of duplexes and triplexes for reasonable prices in relatively central areas compared to where I'd expect you're looking for new builds. It might be something worth considering given your time frames. Welcome to the city as well, the city's catch phrase "it's not that bad" is my favourite saying when I talk to my family and friends back home in Vancouver!


I'll keep looking, and will give your suggestions some consideration.

As for the city, I lived here from '04-06, and in Calgary from '07-10. I don't mind Edmonton, and have a number of close friends here. I prefer Calgary, but Edmonton is "not bad".


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## Just a Guy (Mar 27, 2012)

I think you'll find your cash flow quickly eaten up by maintenance (renters are rough on properties), increased interest, and other fees, not to mention vacancies (one month being vacant will eat up half your profits, assuming no repairs for example). 

As an investment, it's lousy unless you are very lucky with tenants and the future of the economy.


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## Cal (Jun 17, 2009)

Curious to know how much of a dp you are planning to put down too? The rental vs the potential return on that money invested elsewhere.


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## banjopete (Feb 4, 2014)

Freedom45 said:


> As for the city, I lived here from '04-06, and in Calgary from '07-10. I don't mind Edmonton, and have a number of close friends here. I prefer Calgary, but Edmonton is "not bad".


I'm mostly kidding about Edmonton, mostly, but still good luck with your planning.


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