# Purchasing an investment property with multiple people



## killuminati (Mar 14, 2011)

Hi,

I've thought about the possibility of purchasing an apartment style house in downtown Toronto with a cousin.

We are looking for 3-4 units including a basement where we would live in 2 and rent the other available unit(s).

Anyone have experience with doing something like this? Is it possible to get two separate mortgages for the same house, ie 50/50 on the value?

Currently we both rent paying over 1500 each and if we bought ourselves we'd be looking at smaller 700-800 units that only we could live in. The idea here would be to get a decent house around 600k and always have this rental income or sell, we plan to keep and hopefully live there for at least 10 years.

Crazy idea, or possible if you have a good relationship (been close since birth)


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## Cal (Jun 17, 2009)

There is another thread or two on here about that situation.

I don't believe you can get 2 mortgages, but you could get 1 with both parties names.

I don't see the upside in getting half of the profits for potentially all of the liability.


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## killuminati (Mar 14, 2011)

I guess I should have rephrased the title and question. I've seen another good thread which was strictly a rental/investment property.

This is somewhat different as we are young and instead of paying rent we want to buy a decent home that we can both live and own but also have an extra unit to rent out for money to help improve the place. It also leaves us with someone living in the unit if one of us needs to leave the country for extended travel, which is a possibility. It's also pretty much doing it with a very close family member, a brother or sister.

Profits are less of the goal here. A place we can afford that's bigger with a yard in the city vs a tiny condo with a better upside in future value without throwing 3000+ out the window in rent.


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## none (Jan 15, 2013)

killuminati said:


> I guess I should have rephrased the title and question. I've seen another good thread which was strictly a rental/investment property.
> 
> This is somewhat different as we are young and instead of paying rent we want to buy a decent home that we can both live and own but also have an extra unit to rent out for money to help improve the place. It also leaves us with someone living in the unit if one of us needs to leave the country for extended travel, which is a possibility. It's also pretty much doing it with a very close family member, a brother or sister.
> 
> Profits are less of the goal here. A place we can afford that's bigger with a yard in the city vs a tiny condo with a better upside in future value without throwing 3000+ out the window in rent.


Yeah, you've fallen for the buy vs rent Con. Stay liquid - stay renting.

You really need to sit down and do the math on home ownership:

Cost of house first year:
Closing (House cost * 0.05) +
Yearly loss due to inflation (house cost * 0.025) +
Maintenance (house cost * 0.01) +
Interest (house cost * 0.03) -
House appreciation (house cost * GUESS) (My guess would be zero or negative).

Right now, at least in TO and the west coast of Canada, you make lots more money giving your cash to a house owner than you do to a bank.

Owners are usually just renters where their rent goes to the bank anyway.


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## andrewf (Mar 1, 2010)

So, it's not about profit, but you're saying 'maybe upside'. What about 'maybe downside'?


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## none (Jan 15, 2013)

andrewf said:


> So, it's not about profit, but you're saying 'maybe upside'. What about 'maybe downside'?


Yeah, I can only imagine how uncomfortable it would be if the Market fell by 20% and one wanted to sell and the other wanted to hold. No thanks!


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## killuminati (Mar 14, 2011)

andrewf said:


> So, it's not about profit, but you're saying 'maybe upside'. What about 'maybe downside'?


That's why I'm posting here. I'm mostly fed with the good positives of it. I know there are also key downsides I need to bring to the table before jumping in on this.


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## none (Jan 15, 2013)

Based on your 600K quote and my equation - the first year of owning will cost you: $69,000.

This is out of pocket with no money going towards principle. That's almost two years of both of your rents to just break even on the purchase cost.

For each year past that it will cost you $39,000

39*9+69 = $411K (assuming no increase or decrease in RE and no major repairs)

Rent you would have paid: 12*10*3 = $360K

411 - 360 = 51K

If you managed to have full occupancy over those 10 years:
10*12*2*0.8)= 192K

Profit = 192 - 51 = 141K - taxes on that brings you down to $110K

so you have the potential to make 55K each over ten years.

Ooops, market corrected by 20% (which it probably will) you lost 120K.

For all that work you have managed to lose $5,000.

Sounds like a lot of work to spend 5,000K.


This is just me rambling. Does this math make sense anybody?


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## Daenerys Targaryen (May 11, 2012)

How old are you and your cousin killuminati? Are you both single? You say that you are looking to live in these smaller units in this rental for 10 years, but what if one of you meets someone? Can the significant other move-in? What expenses would he/she have to pay? Or what if you or your cousin wants to start a family? What if one of you gets a great job opportunity on the other side of the country? You need to consider what you would do in these situations as well, as anything can happen in 10 years


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## Cal (Jun 17, 2009)

killuminati said:


> Profits are less of the goal here. A place we can afford that's bigger with a yard in the city vs a tiny condo with a better upside in future value without throwing 3000+ out the window in rent.


If profits aren't the goal, why even get a place that has rental units, just get a place w your cousin, that has more outdoor space.

If your cousin loses their job, you are liable for the entire mortgage. 

The potential of getting a better job too far away, getting married, leaving the country as mentioned opens up a whole door of potential risk for both of you.

I know you said you were mostly fed the positives, but I don't see any, other than getting a place with a little more outdoor space. Rent one, stay liquid.


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## killuminati (Mar 14, 2011)

Thanks for all the great feedback guys.

It's so easy to fall into the trap of ownership. Having something to build up and customize to your tastes. I'd throw out a venture that all of you likely own property. It's tough renting year after year and needing to deal with potential landlords and the annoyance of moving every few years.

Clearly from the numbers perspective this doesn't make any sense though and there are lots of risks. 

We are both late 20s with significant others who would be living with us, and would like be traveling inbetween. It feels like this gives us the opportunity to rent out the place while we aren't around for upwards of a year. It's a pain renting, having to store your stuff and having no where to live when you get back.

Also, does anyone seriously think a house in downtown Toronto today will be worth any less in 10 years from now?


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