# Buying First House and Renting it out



## jmbagsy (Mar 14, 2017)

Hi All, I'm thinking of using me being a first-time- home buyer into turning the house (a single residential house or half of a duplex with 3 or 4 rooms) to renting it out. Any thoughts on this?


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## OnlyMyOpinion (Sep 1, 2013)

Your post is not clear. What are you thinking of renting : the whole house, just a room or two, or a basement suite,...?
Being a first time buyer isn't relevant except to suggest you may not know what you are doing - why do you want to buy and rent a house? Where do you live if not in your own house? Do you know if the numbers even work in your market and in a rising mortgage cost environment? Are you committed to owning and being a landlord for at least the next 10 years?


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## redsgomarching (Mar 6, 2016)

first time home buying applies only to houses you intend to live in


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## jmbagsy (Mar 14, 2017)

OnlyMyOpinion said:


> Your post is not clear. What are you thinking of renting : the whole house, just a room or two, or a basement suite,...?


I'm thinking of renting the whole house, let's say 4 bedroom house and if I could easily get 4 person to rent per room. I'm thinking with a monthly mortgage payment on the house of 1,500 and if I could charge each room for 800. I could profit 1700 per month from it less utility bills and other expenses.




OnlyMyOpinion said:


> Being a first time buyer isn't relevant except to suggest you may not know what you are doing - why do you want to buy and rent a house?


I don't intend to live on it so yeah, it will be irrelevant as what the next comment to yours said. I'm thinking of doing this to start investing in real estate.



OnlyMyOpinion said:


> Where do you live if not in your own house?


Currently living with my parents for now



OnlyMyOpinion said:


> Do you know if the numbers even work in your market and in a rising mortgage cost environment?


How do I learn to know these things?



OnlyMyOpinion said:


> Are you committed to owning and being a landlord for at least the next 10 years?


I assumed here it would be easier to be a landlord to a single residential house than an apartment building. So maybe yes.

I may not make sense here since I still have little knowledge when it comes to real estate. I'm still in the process of learning things and just trying to get ideas from those of you here who generously share their thoughts and experiences as a pro in real estate or investing.


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## DollaWine (Aug 4, 2015)

How much % are you putting down and will you have 6 months of emergency cash set aside?


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## Just a Guy (Mar 27, 2012)

First off, renting a "rooming house" is a lot different from renting let's say an apartment. When you rent an apartment to someone, they are contained to one area, interactions between residents is limited, unlike in a rooming house. Social dynamics plays a much larger role, guest management can be a nightmare. Then, here are all sorts of regulations that apply specifically to rooming houses. Health services, the police, fire, etc. Are usually much more involved. I wouldn't touch a rooming house at all.

Of course, you may be thinking of renting to a group of "students", "workers", or whatever...that is your plan, but reality doesn't care about your plans and has a way of doing what it wants like a teenager. His is a highly specialized type of landlording that isn't for most first timers...heck, it's not even for most landlords. In most cases you have to be on-site almost daily to run a rooming house. 

Next, you need to run your numbers again. You didn't provide any, so I can't say much, but I doubt you'll be making $1700 profit on income of $3200 in this market. There aren't too many 4 bedroom houses in desirable areas selling for around $150-160k (the price point needed to make your stated profits). My guess is you're missing a lot of numbers in your "expenses". 

Real estate is a lot more work than any other type of investment. It's not a if you buy it, money will come situation. Not everyone is mentally equipped to deal with being a landlord.

My first advice would be to look at www.easysafemoney.com and a book called the first time landlord by NOLO. Both are excellent beginner books (though the second is American, so isn't always correct with Canadian law).


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## Mortgage u/w (Feb 6, 2014)

The 2 biggest challenges I see are: 
1- most lenders do not mortgage properties that will be used as a rooming house.
2- most lenders also do not mortgage rentals to a first time home buyer.

You can maybe get around the financing by applying at least 20% down, but you will have very limited lenders that will allow it.

If you do manage to get financing, you should rethink your project and/or profit scheme. Get factual numbers - we all know what happens to those who 'assume'.


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## spirit (May 9, 2009)

First of all....I commend you for thinking of ways of making money for yourself. Rental may be an option but perhaps not the way you think. As many have posted....a rooming house is NOT just a matter of renting a room and collecting the money as it rolls in. But there may be a way of doing this for yourself.

When I was first starting to work, I decided to buy a house....a house that would help pay for it. I bought a rooming house with 3 bedrooms upstairs, 4 bedrooms in the basement and a main floor apartment that I would live in. It worked pretty well. I lived in the house and rented rooms out ....there were always some great people who just needed a place to sleep...many worked out of town and stayed in the rooms on the weekends. I had some university students......and it was a good way to earn a living. I also washed walls and floors when they moved out....cleaned out the common kitchens weekly, cleaned up the common bathrooms....yes, I washed the tubs and cleaned toilets.......you dont expect THEM to do it do you?????
Living in the house allowed me to choose my tenants carefully....I actually wrote a lease for them to sign...basic lease...but if they did not sign...they did not get in. I had two BIG brothers who came over to visit quite often and that saved a lot of problems.

But that does not work for everyone. Here is something that some of my younger colleagues have done. They bought a house....lived in the basement suite and rented the upstairs.....that helped greatly in paying off the mortgage and they had a pretty good first place to live. Mind you....the parents had to cosign the loan....you might want to talk to them to see if they are on board. Good luck.


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## sags (May 15, 2010)

These real estate "ideas" all have the same fatal flaw.

In an area where you can buy a 4 bedroom home for $150,000, it won't garner $3600 in rent.

High prices equates to high rent. Low prices equate to low rent. Low prices do not equate to high rent.


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## Just a Guy (Mar 27, 2012)

Spoken like someone who doesn't own any real estate. I've bought many places for an average of $75k/door which rent for around $1175 on average. The difference is, I'm very good at finding these types of properties in a terrible buying market. 

The other nice thing about real estate is that, the longer you hold a property, the more money it generates. The mortgage decreases and rents generally increase. It's not a get rich quick scheme, but it is a fairly good generator of steady income. 

Too many people believe the parable of the sour grapes which, in retrospect, is good for people like me because there certainly aren't many good investments out there.


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## jmbagsy (Mar 14, 2017)

DollaWine said:


> How much % are you putting down and will you have 6 months of emergency cash set aside?


thinking of putting 20% down but that would not leave me much room for a 6 month emergency cash. I posted this to get some ideas on how to make this work. Looks like I still have a lot to learn to delve into this kind of investing strategy.


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## jmbagsy (Mar 14, 2017)

Just a Guy said:


> First off, renting a "rooming house" is a lot different from renting let's say an apartment. When you rent an apartment to someone, they are contained to one area, interactions between residents is limited, unlike in a rooming house. Social dynamics plays a much larger role, guest management can be a nightmare. Then, here are all sorts of regulations that apply specifically to rooming houses. Health services, the police, fire, etc. Are usually much more involved. I wouldn't touch a rooming house at all.


I couldn't agree more about how social dynamics plays a much larger role into this. What was unknown to me was what you mentioned about regulations that specifically apply to "rooming houses" and how health services, police, fire etc are involved.



Just a Guy said:


> Of course, you may be thinking of renting to a group of "students", "workers", or whatever...that is your plan, but reality doesn't care about your plans and has a way of doing what it wants like a teenager. His is a highly specialized type of landlording that isn't for most first timers...heck, it's not even for most landlords. In most cases you have to be on-site almost daily to run a rooming house.


 What I was thinking was renting it to mostly my coworkers who are driving hours to go to work. As much as possible, I'd only rent it to those people I know (mostly from work). But I totally get you that this could go south to first timers like me (especially if I just go decide and do it without too much weighing on the pros and cons about it)



Just a Guy said:


> Next, you need to run your numbers again. You didn't provide any, so I can't say much, but I doubt you'll be making $1700 profit on income of $3200 in this market. There aren't too many 4 bedroom houses in desirable areas selling for around $150-160k (the price point needed to make your stated profits). My guess is you're missing a lot of numbers in your "expenses".


Yes, you guessed it right. I'm missing lot of numbers. This post is for me to have some kind of a grasp on what I need to learn to make this idea work or if it is even worth going through it. 




Just a Guy said:


> My first advice would be to look at www.easysafemoney.com and a book called the first time landlord by NOLO. Both are excellent beginner books (though the second is American, so isn't always correct with Canadian law).


Thanks for the reference. Greatly appreciate it.


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## Mukhang pera (Feb 26, 2016)

jmbagsy said:


> thinking of putting 20% down but that would not leave me much room for a 6 month emergency cash. I posted this to get some ideas on how to make this work. Looks like I still have a lot to learn to delve into this kind of investing strategy.


I'll express a somewhat different view. You are young and want to get going on this project while you are young. If you wait until all the stars are in perfect alignment, there is harmonic convergence and the goddess who protects landlords is smiling, you might have grown old before making a move.



spirit said:


> First of all....I commend you for thinking of ways of making money for yourself. Rental may be an option but perhaps not the way you think. As many have posted....a rooming house is NOT just a matter of renting a room and collecting the money as it rolls in. But there may be a way of doing this for yourself.
> 
> But that does not work for everyone. Here is something that some of my younger colleagues have done. They bought a house....lived in the basement suite and rented the upstairs.....that helped greatly in paying off the mortgage and they had a pretty good first place to live. Mind you....the parents had to cosign the loan....you might want to talk to them to see if they are on board. Good luck.


I'll agree with the idea that a rooming house makes a less then ideal first investment in real estate. I owned one in East Vancouver for awhile. Seven units. A few were just rooms with shared bathrooms and a few were self-contained suites, the largest being 2 bedrooms. Fairly demanding of one's time. If you own one, live close to it. You can then easily attend to small, but regular, maintenance issues as well as putting out brushfires arising between tenants. Roomers tend not to be long-term anyway, but they can get miffed easily with a fellow roomer and depart on the spur of the moment. But usually they expect the landlord to kick out the offending roomer first. But, these operations can sometimes go smoothly for extended periods.

Spirit's suggestion of living in one suite and renting others is where I started in my student days. Used a student loan as a down payment and found a vendor to finance most the the purchase price - at 11% interest. No bank would have taken me seriously. Ninja loans were not the norm in those times. Many here will admonish that duplexes and triplexes are not really investment properties, are purchased only my mental midgets, etc. I say don't listen. 

I also say don't listen to the stock advice about having a 6-month supply of cash on hand and all kinds of precautions against worst-case scenarios. Maybe just have your funeral prepaid in case things don't do well. When I first bought a triplex I did not have 6 days' cash on hand. While it was a triplex, I rented it partly, I suppose, as a rooming house. That is, I furnished and rented the 2 basement bedrooms separately. It had a simple kitchen I stocked with the basics. It was close to UBC. Never had a problem finding students to rent. Sometimes a room would be empty for July and August. These days, with internet and things like Airbnb, it would be easy to rent those rooms in summer.

My point is, I suppose, is that when you are young you can take risks that might be rash later on. Time is on your side. If the whole thing implodes you'll have time to recover. And you will have learned a lot. This will probably strike some here as nuts, but I believe you will learn more and better by taking the bull by the horns and doing. You can read all the books out there. Read until the cows come home. But they can make you feel like you'll never be ready. They can also lead you to wonder if the authors are the great investor gurus they claim to be, or have they figured out how to sell books.

I also say (now getting really out over my skis) do not get too mesmerized by the numbers. You'll be told to check 'em and check 'em again. You'll be told what I was told as a young CA student: "Anticipate all losses; expect no gains". You'll be warned that if a comfy positive cash flow is not a sure thing - not virtually guaranteed by HMTQ - then back off. I say that if you can do simple arithmetic and have even a rudimentary understanding of finances you'll be fine. There might be some lean times, but so what? As my mummy used to say: "You have to cut your coat according to your cloth." That's what you'll learn to do.

And finally, do what you feel is right for you. No one here, and no book, can know you or what will work best for you.


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## jmbagsy (Mar 14, 2017)

Mortgage u/w said:


> The 2 biggest challenges I see are:
> 1- most lenders do not mortgage properties that will be used as a rooming house.
> 2- most lenders also do not mortgage rentals to a first time home buyer.
> 
> ...


I'm thinking of buying a house which have a basement built so that renters there will have their own entrance doors, kitchen, etc. or what they so call in-law suit. This is why I asked if I could use my first time home buying in this kind of venture. Also, I am thinking whether it would be a great risk to generate income from renters with this kind of set up without actually paying taxes from it. Thinking of a set up like with my parents house where all of their children are living with them paying for their monthly mortgage.


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## jmbagsy (Mar 14, 2017)

spirit said:


> First of all....I commend you for thinking of ways of making money for yourself. Rental may be an option but perhaps not the way you think. As many have posted....a rooming house is NOT just a matter of renting a room and collecting the money as it rolls in. But there may be a way of doing this for yourself.
> 
> When I was first starting to work, I decided to buy a house....a house that would help pay for it. I bought a rooming house with 3 bedrooms upstairs, 4 bedrooms in the basement and a main floor apartment that I would live in. It worked pretty well. I lived in the house and rented rooms out ....there were always some great people who just needed a place to sleep...many worked out of town and stayed in the rooms on the weekends. I had some university students......and it was a good way to earn a living. I also washed walls and floors when they moved out....cleaned out the common kitchens weekly, cleaned up the common bathrooms....yes, I washed the tubs and cleaned toilets.......you dont expect THEM to do it do you?????
> Living in the house allowed me to choose my tenants carefully....I actually wrote a lease for them to sign...basic lease...but if they did not sign...they did not get in. I had two BIG brothers who came over to visit quite often and that saved a lot of problems.
> ...


Thanks a lot for sharing your experiences and tips about this. This gave me some ideas on how to make this work.


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## Ag Driver (Dec 13, 2012)

Deleted


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## BeautifulAngel (Jun 30, 2017)

Just a Guy said:


> Spoken like someone who doesn't own any real estate. I've bought many places for an average of $75k/door which rent for around $1175 on average. The difference is, I'm very good at finding these types of properties in a terrible buying market.
> 
> The other nice thing about real estate is that, the longer you hold a property, the more money it generates. The mortgage decreases and rents generally increase. It's not a get rich quick scheme, but it is a fairly good generator of steady income.
> 
> Too many people believe the parable of the sour grapes which, in retrospect, is good for people like me because there certainly aren't many good investments out there.


Hi Just a Guy, 

I was wondering, do you do any maintenance/work on the apartment yourself when let's say there's painting to be done, tiles to put in etc. Do you do all of that stuff or do you hire someone to do. 

Seeing your posts I would think that you are a very handy person because you are smart with your money and make sure you get the biggest BANG out of your money. 

The reason I ask is because a friend of mine is also thinking of buying a house/duplex and renting it out. However, she told me she doesn't know how to do any maintenance so she would hire someone to do plumbing, painting, etc. In my opinion, if I may, it could end up being so much more costly if you need to hire someone any time something needs fixing or updating. 

What's your opinion on this? 

Ashley


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## Just a Guy (Mar 27, 2012)

When you start off, you basically are required to do all the work yourself. One of the things I discovered fairly early was, most things aren't nearly as hard to do as you think. It never hurts to ask someone for help who knows what they are doing and learn from them. 

Too many people believe things are "too hard" to do themselves. My kids were never allowed to say "I can't". They may not have been able to do things the way I would have, but they always were encouraged to find solutions. My kids are growing up to be very creative and never limited. 

When you start to get big in investing, there comes a time when your time becomes too valuable to do the routine maintenance (or, the time I can spend with my family is worth more than doing it) I can make more money finding investments than I can save by doing the work myself. Plus, the cash flow from the investments should cover the expenses. That's when you make the switch. 

The nice thing about rentals is they are a good place to develop handyman skills since theyndony have to be perfect, just nice. 

Of course, real estate is like running a small business. It's not a passive investment. If you don't treat it like a business, you'll probably fail. When the business is small, you do everything, when it grows, you hire people to keep growing, when it's stable you hire people to run it for you.


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