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  • Depends on whether or not housing prices remain steady and possibly rise, or the market tanks. Also depends if your tenants are good ones that respect the property, agreements, and pay their rent and don’t force you into legal actions. But overall, people say buying real estate is usually a good thing. Though with a condo, there is no land ownership, just the inside of the building.

  • If you have no idea how to repair this and that and if your interest is below 5% p.a., forget about it. There are a lot of mistakes to make, e.g. a bad water or electrical system, bad insulation, a bad neighborhood, problems with the tennants,… I own ~10 apartments/ houses in Germany and I can tell: It’s a lot of work. But: There won’t likely be any other way of investing, where you can quite safely work with 50 or more % credit capital, meaning you can deduce income tax by the (historical low) credit interest and can at the same time create interest for yourself from borrowed money. You will have ~ 6% interest when investing long-term in a broad etf. Costs are low at the same time, as well as risk is moderate. But: No pumping up your (meagre) savings with cheap money from the bank.

  • How much would rent be in the area you are looking?

    What are your expected carrying costs?

    Your margin should likely be in the range of 10-20% on those carrying costs at a minimum, to cover other non recurring costs. However, it depends on the unit.

    Some rentals don’t actually produce cash flow, but instead make money off leverage and investment in real estate. Would you be comfortable with this?

    What’s the exit plan if you or your colleague want to liquidate?

  • Rental investments can produce income you just have to do the math. Cost to purchase, cost to get up to move in standards if work needs done, city requirements if you have them ( here it is inspection and a yearly rental liscence), cost to screen applicants, property insurance, property taxes. Then you must factor in cost of repairs which can certainly be expensive such if you have a roof, electrical, plumbing issue (not as much if you can fix it yourselves which we save a ton of money doing).

    If you don’t buy with cash then you have to be able to cover the mortgage during vacancies. We have found multiple unit building like duplexes/triplexes more profitable in our area because the property taxes and insurance are the same as if it was single family so we are making almost double the profit. You just have to do your research and be ready to put the hours in because it is not just passive income.

  • My father & step-father owned a lot of rentals. What I learned is: it’s a lot of work. If you want to spend lots of time messing with the rental, go ahead. You can make money, but it will cost you time.

  • Buy a dividend paying stock on margin. Capital appreciation, income and leveraged returns (all benefits of holding real estate). Significantly lower costs, simplified tax return, you can hold the investment independently and finally if you go with something with a large market capitalization it will be far more liquid.

  • >Any other investments that would be safer/more worthy?

    Honestly… just put it in VTSAX instead. Definitely don’t do it with a colleague. There are a thousand potential sources of friction – stuff as minor as disagreeing on whether to spend the money to get a new water heater or wait for the old one to break.

    And without really loving the hustle that you know you’re getting yourself into, don’t go into real estate for the returns. The only thing it has going for it is leverage (which cuts both ways, by the way).

  • Do you have any numbers at all? Estimated rents? Purchase price? Monthly fixed costs (mortgage, property taxes, insurance)? Expected vacancy rate? Expected monthly repairs? Interest rate?

    There’s no way to tell if your duplex, triplex, or quad plans are worth the hassle without data. And if you’re not already doing research for this data, then I question how serious you and this colleague are about moving forward. I can’t tell you the amount of people that approach me interested in real estate, but never take the a step beyond “interested”.

    In general, look for something with a cap rate >9% and monthly rents are >1% of purchase price. A high cash-on-cash return will also help make the deal better.

  • The Canadian Real Estate market appears to be in the oversupply phase of the cycle, and will likely enter recession within the next few years. Lord knows a correction is overdue. Do you know about the Canadian house price index?

    I believe prices in Montreal are still positioned to go up because vancouver and Toronto have introduced measures to tax foreign ownership, speculation, and vacant properties. My belief is that this is going to be a big election issue going into October. Are you a Canadian?

    I have rented out before, some tenants are a dream and others are a fuckin nightmare. New Tennant laws in bc make it nearly impossible to evict someone. Also, its a huge benefit if you are handy and can do a lot of the more minor or cosmetic repairs. Have you worked in the trades before?

  • Total return in any investment is equal to income plus growth. In stocks that income is called a dividend yield while in real estate that income is called a capitalization rate, or cap rate for short.

    To calculate the cap rate, determine market rent income for the year, then subtract off some percentage for future vacancies you’d expect over the next decade or so (usually around 5%), then subtract off annual operating expenses including taxes, insurance, utilities not paid by the tenant, expected maintenance and repairs, property management, etc. That’ll leave you with net income. Cap rate is that annual net income divided by purchase price.

    In residential real estate cap rates are usually very low (i.e. less than 4%), at least they are here in the Seattle area where I’m familiar with the market. Investors instead make their money on growth in asset value over time. That growth is magnified by leverage because most people leverage their investment 5:1 or 4:1 through a mortgage. The risk of leverage though is that if the asset value drops, then your losses are magnified too. So, you’ll need to be very confident that the asset value will go up or put down a large down payment so that you could survive any downturns.

  • I’d recommend looking at lower income areas for rentals (smaller towns an hour or so away from large cities). I don’t know what the housing market is like in Montreal but when I looked at it in LA there wasn’t a great way to turn a profit doing rentals on a small scale – the cost of real estate was just too high. I was looking at decades before making a ROI.

    Instead, I’ve been buying buildings in my hometown area. I closed on two last year – a 6 unit for ~150k, and a 4 unit for 80k. This is less than you’ll get a down payment for on a commercial loan in many larger cities and I should be getting a ROI in under 5 years. Multi unit properties are key – with the market the way it is around here I could still make a profit on single family homes but multi unit properties will always make more sense from an investment perspective if they’re available.

    One key piece of advice I have is to get a property manager if you still have a full time job. If you’re getting into rentals as an investment a property manager will handle 90% of the day to day stuff like finding and screening tenants and managing repairs or renovations that come up. Even if you and your partner are handy it all comes down to your time and its worth to you. A property manager means you can own more properties with a minimal hit to your free time.

  • You probably want /r/realestate . But these questions are also super n00b questions that are effectively un-answerable (not that that’s a bad thing to have them) so it would be prudent of you to check out some of the readily available resources out there before asking.

    ​

    Check out biggerpockets – their blog and podcast are a good place to start researching.

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