Investment Property / Toronto Rental Market

[JenButNeverJenn]

Does anyone here own property that they rent out?

I'm looking into this option (condos / apartments) and am starting by doing some research ... collecting info from Renters News / MLS / Craigslist / Kijiji on locations / property types / features vs rental price ... and also looking at what potential renters are posting in the "Wanted" section.

Obviously, I'm also comparing this to the costs (mortgage, condo fees, taxes, etc.).

* Can anyone share any insights on the rental market (demands, desirables, etc.)?
* Any pros and cons to this, especially if you know of aspects beyond the obvious ones (ie: crappy tenant situation)?
* Your own story on how you're managing this? Or perhaps why you're specifically avoiding this?

Much appreciated.

 

[ducati0000]

make sure you do a credit check on the renter and ask for past references,make sure all agreements are signed and what they can and cannot do to the rental property,insurance is critical to protect you from lawsuits.Put in the agreement that you are allowed to enter the rental unit with 48 hour notice for repairs or just to look at the condition.If you dont have the time agencies will handle all of the above for a small monthly fee.

 

[TrickyRicky]

^Like said above. Except in the real world none of that stuff will really matter or protect you. There is no substitute for reasonable dealing between two competent parties who have a mutual understanding. The rental lease and all other legal issues are merely an armature to help guide this understanding. If you have a bad tenant that fails to pay or violates their lease or causes excessive damage to your unit, the fact is you lose, legal protection for small claims matters of this nature is ineffective. That said the majority of people in this world respond positively to reasonable dealings and while strange in their own individual ways are overall competent renters. So my main question to you is are you OK with the statements I've made? What I mean is are you OK with the possibility of getting screwed over, or dealing with people reasonably even if they live or think differently from you? That is the fundamental question if you aren't planning on outsourcing the management of your property (which is foolish if you are talking about only one or a couple of units).

 

[JenButNeverJenn]

Thank you for the responses thus far, everyone.

Jen,

What exactly is your goal of owning property? If you can answer that honestly then I can shed some light for you.

Essentially, my goal is to invest in / gain equity through a product (a condo) that will go up in value, while not having to use a lot of my own money.

Depending on the market / my needs / abilities, I'd like to sell the condo (perhaps after several years) and pocket the profit. Or (again, depending on the climate / situation), I continue renting it past the point that the mortgage has been paid off and enjoy the rent as pure income. Both are pretty ideal situations ...

... and now this is the part where you burst my bubble?

 

[OnceAThief]

I'm renting out a condo. I'm lucky to have great tenants and have had a great experience so far doing it.

My advice would be to choose downtown Toronto if you can. As far as i'm concerned theres less risk involved with greater potential for appreciation. Research the area to see what rent is going for before you buy. The ideal obviously is to have rent coming in equal to or greater than your expenses. This can be a hard find in today's market though without putting down a sizeable down payment.

Get parking. Get a balcony.

Choose your tenants wisely, it could make or break your experience as a landlord. It's the single most important thing.

When you get a good tenant, don't be overbearing, treat them with respect and not like a deadbeat as too many landlords do.

 

[ducati0000]

My cousin had to evict a non paying tenant only a few months ago.He was short 3 months rent..my cousin spent about $1400 going thru the courts and having a police present when he was moving so he didnt cause any problems.Total lost for the ordeal was $5000 (rent,court fees,police).There are a lot of professional dead beat renters out there that knows how to play the system for free board so make sure you know what your getting into before coming a landlord.

 

[TPC]

As biased as this may sounds...I for one am a firm believer in hiring an effective and competent property management company to prevent both defunctional tenants from ever securing tenancy and to guarantee the overall smooth operation of an investment property. Although there are obvious fees that need to be paid, a good property management company will make you money, not cost you money.

An alternative would be to use the services of a real estate agent, but again, it's safe to assume that many agents are in it for the quick buck - find a tenant as quickly as possible, do a quick screening that looks good on paper, make commission both at signing and renewal - and often on the term as well. That's 8.33% of your annual gross rent that you're giving away....for what? This is why it kills me to see units/spaces for lease by Real Estate Agents.

Lastly, and I strongly disagree with this, is to find, screen and manage the property(ies) yourself. While people in this position think that they are 'saving' money, they are actually increasing their costs in the form of time. If you are a property investor, your ultimate goal is have your money make you money. Why then would any investor spend time on issues such as resolving leaks, fixing oven doors and other trivial matters? Passion? Desire to succeed?

If passion and desire to succeed are motivating factors, why not focus that energy on finding the next gem that would easily generate high cash flow producing units? Some property management (ah-hem - mine) will actually do all the leg work for you as well in terms of finding golden opportunities - and arrange for financing, closing and full management of the property.

If you can find a property management company that you can trust implicitly, you can mitigate many of the risks involved in the operations of your investment property. Research is essential.

just my 2 cents.

 

[cabbagetowner]

condos generally do not make good income properties to begin with and if you need to get a property manager...then you're probably in cash negative position.

 

[The Condo Observer]

I'm renting out a condo. I'm lucky to have great tenants and have had a great experience so far doing it.

My advice would be to choose downtown Toronto if you can. As far as i'm concerned theres less risk involved with greater potential for appreciation. Research the area to see what rent is going for before you buy. The ideal obviously is to have rent coming in equal to or greater than your expenses. This can be a hard find in today's market though without putting down a sizeable down payment.

Get parking. Get a balcony.

Choose your tenants wisely, it could make or break your experience as a landlord. It's the single most important thing.

When you get a good tenant, don't be overbearing, treat them with respect and not like a deadbeat as too many landlords do.

Totally agree with this post. Would add the following:

Given today's pricing, you really need to invest 1/3, not 1/4 as is commonly held out as the break even point.

I list my properties on the mls , with a good broker, who is authorized to conduct screening, in the process of finding a AAA tenant. The do exist!

 

[EverythingZen]

Totally agree with this post. Would add the following:

Given today's pricing, you really need to invest 1/3, not 1/4 as is commonly held out as the break even point.

I list my properties on the mls , with a good broker, who is authorized to conduct screening, in the process of finding a AAA tenant. The do exist!

As I was taught, for an investment in real estate to adequately compensate for the risk, an investor should be deriving a positive reutn with zero percent down, were it theoretically possible. Otherwise he's not getting a return that's greater than the mortgage rate even though he's taking a greater risk than the mortgage lender! As we have seen clearly around the world and in Canada recently, because of the risks of investing in real estate, the return should be at least as high as the cost of capital. Investors not achieving returns that exceed the cost of money is the very reason why the credit markets have collapsed around the world. You cannot always count on capital appreciation to bail you out of a bad investment. Real estate is cyclical as we've seen everywhere.

The requirement above for a larger downpayment really obfuscates the true situation. It is equivalent to saying that an investment that loses $500 per month will only lose $300 per month if you borrower less money and pay less interest! That doesn't at all change the quality or nature of the investment. You just end up subsidizing your future loss with more of your money upfront.

The foregoing is merely my opinion. If you disagree I welcome your comments.

Peace & Kindness

 

[cdr108]

As I was taught, for an investment in real estate to adequately compensate for the risk, an investor should be deriving a positive reutn with zero percent down, were it theoretically possible. Otherwise he's not getting a return that's greater than the mortgage rate even though he's taking a greater risk than the mortgage lender! As we have seen clearly around the world and in Canada recently, because of the risks of investing in real estate, the return should be at least as high as the cost of capital. Investors not achieving returns that exceed the cost of money is the very reason why the credit markets have collapsed around the world. You cannot always count on capital appreciation to bail you out of a bad investment. Real estate is cyclical as we've seen everywhere.

The requirement above for a larger downpayment really obfuscates the true situation. It is equivalent to saying that an investment that loses $500 per month will only lose $300 per month if you borrower less money and pay less interest! That doesn't at all change the quality or nature of the investment. You just end up subsidizing your future loss with more of your money upfront.

The foregoing is merely my opinion. If you disagree I welcome your comments.

Peace & Kindness

^^^
THAT is the proper way of real estate investing.

It's ALL about CASHFLOW >>> POSITIVE cashflow that is.
One should NEVER have to pay out of pocket.

Currently, the case for most RE investments in Toronto to even see a cent in cashflow would require downpayments from 40-50%. Not very prudent.

I see many listings on MLS for sale, and many of them are not financially feasable.
It's sad and misleading in the descriptions you have the selling agent listing a property as a good income property when it doesn't even cover 50% the mortgage

 

[rbt]

As I was taught, for an investment in real estate to adequately compensate for the risk, an investor should be deriving a positive reutn with zero percent down

Of course, one could become a mortgage lender. Lots of folks and corporations looking for private mortgages.

 

[EverythingZen]

Of course, one could become a mortgage lender. Lots of folks and corporations looking for private mortgages.

It appears that you've misinterpreted my comments. A mortgage investment should, theoretically, yield a lower return than an equity investment because a mortgage investment has greater security. Less risk/less return.

This basic concept appears to be turned upside down temporarily, but it will surely set itself straight in Toronto has it has done everywhere else in the world.