# Sholuld I go ahead with this rental property proposal?



## Mike2161 (May 31, 2012)

Hello
I am planning to purchase a rental property as a source of passive income. My agent told me that the best rental properties for student would be in London around the university.
Following are the details of the property. As I am quite busy, the agent is emphasizing that this proposal would be hassle free and the management company would take care of everything.

Purchase Price – 369,900
Land Transfer tax – 1200
Title Insurance – 400
Total Purchase cost – 375,323
Mortgage (80%) – 295,920
Down Payment – 79,603

Annual Rental income - 29700 
Annual Mortgage payment - 16623
Annual Management (4% of rental) - 1188
Annual Property tax - 2562
Annual estimated insurance
Annual net income - 8126

( Calculations based on - Mortgage calculated @ 2.9% with 25 years amortization)	




Thanks a lot in advance.


Mike


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## Spudd (Oct 11, 2011)

Based on the purchase price, your property taxes will be $5060. Perhaps they haven't adjusted the assessment lately, but I would not be surprised if it rises once you've bought it. 
http://www.london.ca/residents/Property-Matters/Property-Taxes/Pages/Residential-Property-Taxes.aspx

I don't have any knowledge of real estate investing so I won't try to give advice on the rest.


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## humble_pie (Jun 7, 2009)

mike u are funny each:

you're the busy medical doctor, right? once a year or once every 15 months or so, u like to visit cmf forum with a big serious financial question, right?

this time it's the real estate agent who's picked up on how u want real property that pays but never shows any attitude. So that's what he's selling to you.

alas the way i see it, student tenants have the most attitude of all.

personally i think downtown parking garages might be easier to own.

there are real estate investment products called REITs. Many former landlords end up owning REITs, after they've recovered from the stress of individual building ownership.

but alas (again), REITs are on a downward path at the mo, as interest rates seem to have troughed already.

doc, why don't you do a plain couch potato with maybe an extra allocation to REITs if you're truly fond of bricks & mortar? there are expert REIT investors in this forum who can tell you which REITs are heavy in commercial real estate with solid, recession-proof tenants, at the other extreme which REITs hold shaky apartment buildings full of students or future housing tract slums.


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## peterk (May 16, 2010)

How is the management fee 4%? Aren't most companies charging 1 months rent? And that's for a regular rental. I would imagine student rental management would cost double...?


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## Mike2161 (May 31, 2012)

humble_pie said:


> mike u are funny each:
> 
> you're the busy medical doctor, right? once a year or once every 15 months or so, u like to visit cmf forum with a big serious financial question, right?
> 
> ...


Humble pie
Thanks a lot for your quick reply but trust me it is rather my desperation and frustration of the investment experience so far from various so called financial advisors that I am looking for various investment options rather than just stocks. So far all the investments are down and most of these investments are in high MER mutual funds with high DSC (so I am not able to take these out immediately). My search for a good advisor is still continuing without much success. In the meanwhile this guy spotted me as a potential investor through one of the acquaintances and told me that there is nothing much in the stock market and the best way to go for a passive investment would be some sort of rental property and handed me the brochure.
I am myself very skeptical about any such proposal being burnt once and that is why I don’t want to go ahead without advice from the experts on this great forum. 
Since last year I have started following couch potato approach and have not invested any more funds in the mutual funds.
Humble pie, there are ignorant people out there; please don’t make fun of them!
Mike


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## Mike2161 (May 31, 2012)

peterk said:


> How is the management fee 4%? Aren't most companies charging 1 months rent? And that's for a regular rental. I would imagine student rental management would cost double...?


Yes. The management fee as per the agent is 4% and he is emphasizing that they would be responsible for the all the issues what so ever and I will not be bothered. 
Mike


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## MoneyGal (Apr 24, 2009)

Mike: you may want to look again at your investments and find alternatives with low MER (even very low MER) and no DSC. The fact that you have high MER funds with DSCs does not mean that stock market investing isn't workable. This has been a *fantastic* year in markets (spoken with a broad brush)


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## lightcycle (Mar 24, 2012)

What about repairs and maintenance?


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## Just a Guy (Mar 27, 2012)

This property will cost you a small fortune in the long run. Interest rates are already starting to climb...when your renewal comes, your going to have to come up with an extra $100/month for each 100k of loan on each 1% interest rate increase...eating into your already small profits. Also, don't forget about the $80k down payment which is now essentially dead money.


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## MorningCoffee (May 8, 2013)

Of course the agent would say this would be hassle-free - that's what you wanted to hear and he wants the commission on the sale. A few concerns I have:

- Property management costs seems quite low. What is included?
- When property managers need to "take care" of anything, it costs extra to send someone. 
- Maintenance, snow removal, lawn care if needed are all extras.
- Repairs are extras - what will need to be fixed or replaced soon?
- Would you be responsible for any utilities? Water taxes? Property taxes also seem quite low for the purchase price - they may change.
- What type of property is this? Single home, duplex? Is it currently rented? Can the market support the projected rental numbers? Don't rely on the agent. Compare to current rental prices for comps in the area.
- Vacancies hasn't been taken into account.
- Insurance costs?
- Mortgage rates - 2.9% won't be around forever.

There's too much information missing, but your numbers don't meet my criteria. It's too expensive for the rental income and isn't cash flow positive according to my criteria (you have to force it and put in your own money for it to be cash flow positive). Even with a property manager, income properties still need some of your attention. I don't consider it passive income.


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## humble_pie (Jun 7, 2009)

dr Mike, i truly wasn't making fun & i am certainly sorry if you felt this. The fact is i appreciate your being a busy MD very much. There's not a single province in canada where physicians, surgeons & nurses are not being worked to the bone. All are caring for their patients to the utmost, although the system does not adequately support them, & we are so fortunate that this continues to be the case in canada.

every time i visit a public hospital or clinic in my city, i am amazed & bowled over & grateful at how excellently all the staff are managing to treat the huge crowds that now seem to be permanently encamped in every single waiting room & ER.

back to your investments: taking a long-distance view, it's a fine thing that you've stopped completely with the DSC mutual funds imho. I know time is precious, but you'd want to have a rough schedule for winding down the DSC heavies. I would imagine that each year you can take out some capital without penalty. Of course, there would be capital gains/losses to declare & pay taxes on when you cash in these fund units.

at times it might be worthwhile paying a small penalty & taking out more.

plus you mention you have started up a couch potato strategy with all new investment contributions? this is terrific.

there's a quick, condensed link to the world of couch potatodom which might serve you nicely. A moderator of this forum runs 2 model couch potato portfolios over on Canadian Capitalist dot com. He calls them sleepy portfolios. There's a senior portf with - i think - about 6 basic etfs, plus a junior portf with exactly 4. Of the 2, i think i prefer the senior one.

what's handy about this for a busy MD is that CC seems to update & rebalance four times a year, with a short article describing what he's doing & why. The text you'd have to read is minimal, but every single word counts. The transactions you'd have to undertake are few, but you'd have a clear model to follow.

there's a link to canadiancapitalist dot com at the bottom of this screen. A more elaborate way to do things would be to study canadiancouchpotato dot com & construct one's personal model from there; i only mention CC's version because it's shorthand & saves time, yet it is reliable.


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## sags (May 15, 2010)

With students, you probably will only get 9-10 months rent, as many go home for the summer.


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## Ag Driver (Dec 13, 2012)

Mike2161 said:


> Land Transfer tax – 1200
> Title Insurance – 400
> Total Purchase cost – 375,323
> Mortgage (80%) – 295,920
> ...


Mike,

I am no expert, but I am going through the purchase of a property in London right now. Again, I could be wront, but I do feel that there are two numbers that are quite low in the calculations.

1) Land Transfer Tax - I calculated it to be $4023.50, or $2023.50 at best if you are a first time home buyer. Ref: http://www.landtransfertaxcalculator.ca/

2) Property Taxes - I calculated it to be $5060. I just purchased in London for 262k and the 2013 taxes were $3105. Ref: http://www.london.ca/residents/Property-Matters/Property-Taxes/Pages/Residential-Property-Taxes.aspx

Also, Do not forget about legal/disbursement fee's during your transaction, monthly rentals such as water heater, ac, any protection plans for furnace etc. . Just going through this process myself, I should also add to refuse to pay any security deposits. A free credit check from Equifax will suffice for London Hydro and Union Gas.

You also did not mention how many rooms, or how you calculated your income. Given the broad statement of "rental property" near Western, and the fact that it is of high value, I can only assume it is a 3/4/5 bedroom house. The room rental rate varies between $400 and $500 on average, depending on inclusive, or non-inclusive. Given your estimated income, I can only assume that it is a 5 bedroom, and you are on the high end of the average scale. That is also assuming you have all rooms rented, year round. Ref: http://offcampus.uwo.ca/average_rentalprices.htm


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## Mike2161 (May 31, 2012)

MoneyGal said:


> Mike: you may want to look again at your investments and find alternatives with low MER (even very low MER) and no DSC. The fact that you have high MER funds with DSCs does not mean that stock market investing isn't workable. This has been a *fantastic* year in markets (spoken with a broad brush)


Thanks MoneyGal
I have slowly started to follow couch potato approach for my new investments done this year. The investments done earlier through the advisor are still negative in spite of upward market trend. I am closely following these and hope for the best.


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## Mike2161 (May 31, 2012)

lightcycle said:


> What about repairs and maintenance?


True. Repairs and maintenance will be my responsibility and I realize that there are lots of issues in these types of investments. Looks like it would not be a straight forward affair as the agent is suggesting. Thanks.
Mike


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## Mike2161 (May 31, 2012)

Just a Guy said:


> This property will cost you a small fortune in the long run. Interest rates are already starting to climb...when your renewal comes, your going to have to come up with an extra $100/month for each 100k of loan on each 1% interest rate increase...eating into your already small profits. Also, don't forget about the $80k down payment which is now essentially dead money.


I think I will not go ahead with this deal at this time. Looks like I have a lot of homework to do. Thanks a lot.
Mike


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## Mike2161 (May 31, 2012)

MorningCoffee said:


> Of course the agent would say this would be hassle-free - that's what you wanted to hear and he wants the commission on the sale. A few concerns I have:
> 
> - Property management costs seems quite low. What is included?
> - When property managers need to "take care" of anything, it costs extra to send someone.
> ...


MorningCoffee
The management cost would include finding tenants, making contract with them, collecting rent etc. The snow removal, I was told will be tenant’s responsibility. The lawn care would be at my cost but will be coordinated by the management firm. Repairs of course will be my responsibility but utilities will be tenant’s responsibility. It is a single home with 5 rooms (rent being about 500 dollars per room). and when I will be given the property, the management company would make sure that all the 5 rooms are occupied. 
As you have pointed out the vacancies have not been taken into account.
Can you please elaborate when you say numbers don’t meet your criteria?
Thanks.
Mike


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## Mike2161 (May 31, 2012)

humble_pie said:


> dr Mike, i truly wasn't making fun & i am certainly sorry if you felt this. The fact is i appreciate your being a busy MD very much. There's not a single province in canada where physicians, surgeons & nurses are not being worked to the bone. All are caring for their patients to the utmost, although the system does not adequately support them, & we are so fortunate that this continues to be the case in canada.
> 
> every time i visit a public hospital or clinic in my city, i am amazed & bowled over & grateful at how excellently all the staff are managing to treat the huge crowds that now seem to be permanently encamped in every single waiting room & ER.
> 
> ...


No issues Humble pie, I truly appreciate the help I get from this forum. If you have not seen my post for a long time, it is only because I am not knowledgeable enough to contribute to the discussions going on here. But I have been a regular reader and only because of this forum, I could gather courage to create a portfolio following couch potato approach.
The strong message I am getting from your reply is that it is better to stay away from rental properties and rather invest in REIT. This is indeed is a very valuable advice to someone like me.
I am trying to very closely monitor my investments done through the advisor and am pretty confident that I will be out of that crap in a year or so.
BTW, thank you very much for those kind comments about medical professionals.
Mike


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## Causalien (Apr 4, 2009)

Mike,

You should hire me.


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## humble_pie (Jun 7, 2009)

dr Mike, if you have 80k waiting to be invested, perhaps you could think carefully again about REITs?

they are sensitive to interest rate trends & these are not looking favourable at the moment.

there are cmf members with extensive REIT knowledge, i'm certainly not one, my sole REIT at the moment is dundee internat'l in tfsa & it's not looking all that pretty in the short term.

you yourself would own a home, i presume? not that i would know anything, but wouldn't that mean that any additional real estate exposure should be commercial property, not residential?

i think if i had 80k sitting in a portf doing nothing, i'd be very careful these days, i might add some to existing core holdings, a HISA would also look good.


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## alingva (Aug 17, 2013)

OMG, do not ruin your life, you make money when assets are cheap, not when market is up for years, Can Real Estate is a debt bubble!
Your expenses will be +-15% higher than projected, income will be +-15% less than projected and the interest will not stay 2.9% for 25y. 
I am pretty sure you will not listen to my advice because your real estate agent or your bank say otherwise (and what would you expect them to say???)


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

Hi Mike, glad to read you seem to be taking the good advice being offered herein. For a busy MD I think the LAST thing you want to do is tie yourself to a rental property. It's a lot of work. True, the mgmt co. does take care of a lot of day to day stuff but I can assure you that you will still be bothered if the tenant does not pay or leaves the place messy or prevents new RE agents from showing the property down the road when you finally decide to sell. There is also the stress and work of cleaning the place every time a tenant moves etc. Ugh. Anything but this.

I do understand your frustration with investments as I am kind of in the same boat. I am looking into my own brokerage account at the moment so I am no longer at the mercy of sucky MF performance. Yes, I took a loss when I sold a lot of MFs. But the fees and hassle can be very high in a brokerage account too. Either way, if you want your money to grow unfortunately you will have to take at least some sort of active role in setting up and monitoring. If you're a busy as I think you are I suspect you might want to go slow, stick around and learn in CMF, maybe set up a brokerage practice account in the meantime and try to learn the ropes before committing to anything. Perhaps you could stick your money in HISA or GICs for now, at least you would guaranteed 1% (taxable) or so until you figure all of this out.

P.S. Thank you for your service to society.


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## marina628 (Dec 14, 2010)

London Ontario is not Vancouver ,Student housing would be a good investment there but you need to adjust your numbers ,count on paying at least 4% interest ,allow for some vacancy and utility expenses. But since you would be counting on others to take care of issues and repairs you really need to have a reserve fund for this as well. In the three years I have been on this forum and people have advised against investing in Real Estate my properties have appreciated over $400,000 so if you are serious about investing in Real Estate I would look at local stats including the student population trends.


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## MorningCoffee (May 8, 2013)

Mike2161 said:


> Can you please elaborate when you say numbers don’t meet your criteria?
> Thanks.
> Mike


I add up all expenses except for mortgage payments, including water tax, property taxes, insurance and any utilities I am responsible for. I then add 5% of yearly rent for property management, 5% for maintenance and 5% for vacancy (which are all conservative numbers in my opinion.) If these come to more then 50% of rental income I don't touch it. I prefer it to be under 40%.

I also want the monthly rental income to be at minimum 1% of the purchase price. Closer to 2% would be better. So for the property you are looking at, I would need the rent to be at least $3,699 per month. You have an estimated rental income of $2,475 per month which is too low at about 0.67%. My goal is for the property to be cash flow positive after all expenses and it being leveraged at 100%. It doesn't mean properties have to be mortgaged to 100%, but they would still cash flow if they were. The above gives me a quick way to check if the math seems to work. If it does, I study the numbers more carefully. 

That being said, that's what I'm looking for and what I'm comfortable with. There are many strategies when it comes to real estate. My strategy doesn't account for appreciation, which should happen (but doesn't mean much to me unless I plan to sell). I don't want to be paying the mortgage out of pocket and hope the property value goes up. Don't jump in too quickly. Do your research and decide what your criteria is to evaluate a property. Real estate can cost you much more than high MERs if you are not careful.


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## andrewf (Mar 1, 2010)

^ Do you ever find properties that yield 24% per year?


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## blin10 (Jun 27, 2011)

Total Purchase cost – 375,323

Annual net income - 8126

that's a 2% return... not good


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## Just a Guy (Mar 27, 2012)

andrewf said:


> ^ Do you ever find properties that yield 24% per year?


My last couple of purchases this year earn significantly more than that based on YTC. As I finance 100%, any ROI would technically be infinite.


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## MorningCoffee (May 8, 2013)

andrewf said:


> ^ Do you ever find properties that yield 24% per year?


As in 2% of purchase price x 12 months? Yes a few, on paper, but I wouldn't want to own them. They are in very problematic areas, which means old buildings, more repairs, more damage and tenants that don't always pay rent. We've decided to focus on areas that attract better tenants.


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## andrewf (Mar 1, 2010)

ROI = return on investment. 100% of the purchase price is the investment, regardless of how it's financed (equity or debt). Why? Because if the asset disappears tomorrow, you're still on the hook for any financing.


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## Just a Guy (Mar 27, 2012)

I never invested any of my own money...yes I'm on the hook, but usually the ROI is calculated on the actual cash invested as in the down payment.

As for the quality, I found a place a block away from a major trade school. It was weird, two suites under one title a bachelor and a one bedroom in a nice apartment complex. Picked it up for 73k, generates $1600/month ($750 & $850). So morningcoffee, you just proved the old joke about what happens when you assume...

Places exist, are the common, no. I work at finding them. Right now I'm looking into an 11 unit apartment which is asking Around $550k and generating $5900/month. It also comes with a 3 bedroom house which should add another $1200 income.


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## MorningCoffee (May 8, 2013)

No assuming - I know they are out there. I'm looking in a pretty specific area, and so far those I've found with that kind of returns are, well, dumps to put it nicely. And that's being generous. It differs greatly from one city to another. So for me, personally, no haven't found any that good yet. I hope that changes


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## andrewf (Mar 1, 2010)

Just a Guy said:


> I never invested any of my own money...yes I'm on the hook, but usually the ROI is calculated on the actual cash invested as in the down payment.


Return on equity is the return on your net equity investment (ie down payment). Return on investment is return on assets.


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## Mike2161 (May 31, 2012)

Thanks CMF friends for your advice. Most of you felt that it was not a good idea to go with rental properties in general and some of you nicely explained why this proposal was not a good one. Looks like there are occasional members who are successfully managing the rental properties but by and large most of you do not seem to favour these types of investments. I have decided not to go ahead with this deal and most probably I will try to stay away from investment rental properties. Again, thanks a lot.
Mike


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## Just a Guy (Mar 27, 2012)

I think you'll find that attitude true of any investment. There are good investments in everything real estate, stocks, bonds, junk bonds, penny stocks...

There are people very successful in all of them, and there is a huge amount of people who will warn you away from whatever investment you're looking at as "too risky". My advice is pick an area, and learn about it...ignore the sideline chatter, but pull the trigger (there's a good article about this) and do something...you can't make money unless you do, and everything is a risk.


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## marina628 (Dec 14, 2010)

I agree with Just a Guy ,really unless somebody has experienced being a landlord they really have no idea how to advise you. They can share what others have told them or from reading articles. In my opinion we have a property manager here (Rachelle) who has a broad exposure to this sector and she probably knows best the type of investor who has succeeded and who has failed. Most people I know who get into real estate would not be able to cover the expenses on a rental if the tenant delayed paying rent even for a week. Buying real estate for investment is a business and you have to treat it that way. You also need to be in it long term minimum 5 years but ideally much longer. I bought a house in 2008 for $210,000 and my Mortgage was $166,000 at the time .Today it is $104,000 and I can sell this house for $290,000 net. So my $45,000 cash investment will allow me to cash out $180,000 in under 6 years. This property was brand new so we have not had to do anything on it at all. The house carries itself and allows us to pay $400 extra on the mortgage every month from the rent. Student rental would not be my first choice nor would buying a house to have people upstairs and renting the basement to tenants as well ,too many personalities in one small space. We have expanded into USA now with rentals and have management company doing the work for us ,We have 4 rentals in Atlanta and all giving us about 20% CAP .We paid cash for them but will get mortgages in next 1-2 years on them to offset revenue. Like anything you have to put the work in to find a good investment ,they are there but not every property is good. I have been scanning MLS for another home for at least 14 months and yet to find one that meets all our criteria.


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## humble_pie (Jun 7, 2009)

there's a ton of difference between folks who invest in real estate on a professional/semi-professional basis & folks who have entirely different, heavily-stressed & extremely challenging professional careers that keep them busy 150% of the time.

a stock loss is one thing. It's only dollars. A busy physician can handle this without damaging loss of time imho.

on the other hand, a building full of students who party, damage, property needs new roof/furnace/back porch, etc - ie something beyond the property manager's contracted performance - could be a stressful time-&-energy drag on an MD who'd been hoping for a docile, passive, dehumanized bottom line return.

i would imagine most MDs have their hands full with their patients' medical problems, surely the last thing doctors would want to hear about would be outrageous problems created by their patients in their physical living/sleeping arrangements ...

(aside to dr. Mike) have you really been building a couch potato portfolio of your own, based on etfs? how very interesting, there are not many MDs who come here & tell us that.

if you look at CC's posted records with his 2 "sleepy" portfolios - the ones i mentioned upthread - you will see that success has come with the passage of time. In other words, these things are not sexy at all in their first year or 2, or even 3. The sleepy portfolios have been operating for at least 6 or 7 years.

doc, i wonder whether an influence weighing upon you is frustration with what you feel has been poor return from the portfolio of mutual funds that were sold to you by advisors? this, in turn, causes me to wonder whether a certain sub-conscious impatience has crept in, which may be urging you to seek a higher return in order to catch up?

if so, i believe such impatience could lead you astray. Especially right now, when stock markets are so seethingly high & pundits on all sides are talking uneasily about a correction. So I'm hoping you will resist temptation & keep your allocation to plain fixed-income & secure interest payors high, even though the returns right now are so pathetic.

in any event, very best wishes.


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## marina628 (Dec 14, 2010)

My friend is a Plastic Surgeon and he bought commercial space to move his practice then rents excess to various therapist .He has an office manager who handles day to day operations ,not sure how your practice is set up but if you pay rent yourself it may be an alternative. But if you are doing this from frustration of poor returns it is not a good reason to get into being a landlord. As long as I can remember our retirement plan always consisted of building a rental portfolio that would provide us our retirement income but my husband has a trades background so he could handle the upkeep and repairs for us and also do things like building decks , finishing basements etc to add value along the way. Our friend is a Doctor and my husband goes over every year to show him how to start the snow blower ,He wanted to buy an investment property as well but we told him he will lose his shirt because he has no clue how to do anything and labor cost would be too much on upkeep over the years. So if you are a bit handy you have an advantage but if you are counting 100% on contractors doing all your upkeep you need to budget these expenses .


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## humble_pie (Jun 7, 2009)

yea we should def suggest to dr. Mike that he should get his spouse to start snowblowers, build decks, finish basements & handle building upkeep


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

If you can't find any decent properties with positive cash flow, stay away. It is a sure sign the market is overpriced. I can't say it won't go higher, just that it is too high to start buying.


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## Mike2161 (May 31, 2012)

Humble pie, you are absolutely right in assessing my situation. It is indeed my frustration which has prompted me to look for other options of investments to catch up with the loss. But now I am little better than before in the sense I have not done any mistake of investment from the time I am following this forum. I have built a couch potato portfolio ( I had to take a professional help at the time of carrying out on line transactions simply because that was my first time to do any such investment and I wanted someone to give me the confidence to carry out the transactions). I am waiting for the right moment when I would transfer RRSP funds from previous advisor to my discount brokerage account so that the portfolio would become bigger than what it is right now. So far my portfolio only includes RRSP and TFSA accounts and so far I did not carry out any investment from non registered account. 
Reading some of the books suggested on this forum (Either to me or to some other members), I realized that many of these authors tend to suggest a second source of income / retirement income, preferably passive). The impression I was given by the agent was rental properties in London is the way to go about rental investments in Ontario these days. But I did not want to take decision without some independent advice. I have made my decision because I know my limitations when it would come to repairs, maintenance etc. 
Marina, I understand you are now investing in US but how do you manage this from a distance? 
Again, thanks a lot for all your suggestions.


Mike


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## andrewf (Mar 1, 2010)

Mike, your losses are in the past. You can't catch up with them. Your investment decisions should be based on what you expect to work well in the future, regardless of what happened in your past. This is really important. Many people fall into the trap of holding a bad investment in hope of eventually breaking even, or taking too much risk to make up for past failures.


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## MoneyGal (Apr 24, 2009)

Or deciding that stock market investing in all forms will produce the bad results of the past - if I recall your concerns, they had to do with product features (i.e., high MERs, deferred sales commissions) coupled with sub-par advice - these are not reasons to avoid markets, but to avoid those kinds of products and sales channels.


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## humble_pie (Jun 7, 2009)

Mike2161 said:


> But now I am [a] little better than before in the sense I have not done any mistake of investment from the time I am following this forum. I have built a couch potato portfolio ( I had to take a professional help at the time of carrying out on line transactions simply because that was my first time to do any such investment and I wanted someone to give me the confidence to carry out the transactions). I am waiting for the right moment when I would transfer RRSP funds from previous advisor to my discount brokerage account so that the portfolio would become bigger than what it is right now. So far my portfolio only includes RRSP and TFSA accounts and so far I did not carry out any investment from non registered account.



hey. I think your story is thrilling. Carry on!


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## GoldStone (Mar 6, 2011)

Dr. Mike,

Here's a short read that I hope you find beneficial.

William Bernstein’s Advice to the Young Physician

Just in case you don't know the author, William Bernstein is a former physician (neurologist). He later switched careers and went into finance. He wrote several bestselling books for individual investors. One of the books, The Four Pillars of Investing, has become an almost instant classic.


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## Just a Guy (Mar 27, 2012)

I always find it interesting how all the horror stories of being a landlord always come out. Usually these are retold by people who don't own any real estate. 

Yes, there are problem tenants, yes being a landlord is work. I have found the double 10% rule is true. 10% of your tenants will cause problems, of that 10% of those (1%) are really bad (the ones people tell stories about). 90% of my tenants are trouble free and generate constant hassle free income. 9% may be a minor issue (like not paying rent on time every month, being a bit late, etc.). Compared to the stress of a physician, I can generate a similar income with a lot less effort or stress, but I wouldn't say you should quit being a doctor. 

No one talks about good tenants, they don't make good stories.


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## Cal (Jun 17, 2009)

andrewf said:


> Mike, your losses are in the past. You can't catch up with them. Your investment decisions should be based on what you expect to work well in the future, regardless of what happened in your past. This is really important. Many people fall into the trap of holding a bad investment in hope of eventually breaking even, or taking too much risk to make up for past failures.


Great advice!

The other thing that I would mention, not that it is a deal breaker in your case with 20% down, but I always hate how people forget to calculate the investment potential with the RE downpayment money.


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## GoldStone (Mar 6, 2011)

Just a Guy said:


> I always find it interesting how all the horror stories of being a landlord always come out. Usually these are retold by people who don't own any real estate.
> 
> Yes, there are problem tenants, *yes being a landlord is work*. I have found the double 10% rule is true. 10% of your tenants will cause problems, of that 10% of those (1%) are really bad (the ones people tell stories about). 90% of my tenants are trouble free and generate constant hassle free income. 9% may be a minor issue (like not paying rent on time every month, being a bit late, etc.). Compared to the stress of a physician, I can generate a similar income with a lot less effort or stress, but I wouldn't say you should quit being a doctor.
> 
> No one talks about good tenants, they don't make good stories.


What's your point? Are you trying to suggest that a busy doctor should take on a second part-time job of being a landlord?? That's what this thread is about.


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## marina628 (Dec 14, 2010)

Mike when we bought in USA we found a good management company before we purchased any homes.Once we got that set up and owned the homes they first got us contractors to do the work we wanted to do .Mainly freshen the place up although one required a gut job on kitchen and bathrooms.Then they found the tenants but they gave us their best 3 and we made final decision.


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## Just a Guy (Mar 27, 2012)

No, I'm saying that a lot of inexperienced people have opinions. When I started, I managed places myself, as it became more work, I hired people to do the work for me. As long as the cash flow works and you know what you are doing, ANY form of investing can make you money...

I'm saying don't listen to the naysayers who aren't successfully doing the type of investing he's considering, and don't quit your job if you like doing it. I would also avoid listening to people who profit off of your investing (brokers, real estate agents, etc.) as opposed to those who make money doing the same type of investing.

I'm not saying he should buy real estate but, if done correctly, it can make him a lot of money with little to no work (no I didn't outlay the way to do that in one short posting)...same is true for options trading, penny stocks, blue chips, house flipping, selling on eBay or whatever...they are all ways to make money and, if you're smart, you can probably figure out a way to hire someone else to do the work (I learned that from owning companies). The real point though is he has to DO something and not be scared by people who've never done it successfully and only relay horror stories.


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## John09 (Oct 20, 2013)

I got in the student rental last yr to help my kid living away from home. I bought a 1800sq ft townhouse was orrig 4 bdrm but was 3 bdrm when purchased. Purchased for approx $215k with fees etc. I bought it with 0 down by using credit line on my home. I changed the home back to 4 bdrms and finished the basement and rebuilt bathroom with cost of about 4000. I put my daughter in one room and rented 4 rooms out for the yr which brought in approx 2100 month or $25000 yr in rent for yr 1. My expenses for yr approx $1600 month. Left approx 6000 extra which I alloted to home improvements repairs to fix home up in prep to sell it when done with home after 4-5yrs. In yr two im approx identical numbers, but now with my principal residence paid off Im directing money to the credit line now to knock this one down. 
Having my daughter live in home makes things smoother considering i live 500km from the home. I have a contractor as my go to guy for repairs when needed who bills me for work. There is work involved but so far not a cent out of pocket and the home has gone up in value with smaller 3 bdrm units selling in the 240s now. My goal was rent free living and break even but at this point im well ahead!!!


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## Taraz (Nov 24, 2013)

andrewf said:


> ROI = return on investment. 100% of the purchase price is the investment, regardless of how it's financed (equity or debt). Why? Because if the asset disappears tomorrow, you're still on the hook for any financing.


Unless you're in a non-recourse province, and you have a 20% downpayment (i.e., no CMHC). In that case you would only be out your initial investment. Of course, if you put down 20%, it would have to be a pretty serious real estate crash for your equity to become negative in that situation.


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