Mr. Cheap asks: Help me buy a house!

by Mr. Cheap

I’m gearing up to buy my second investment property. Now that I’ve been at the university for a year, settled in pretty well (it’s not looking like they’re going to kick me out) and know the area a bit better, it’s time to consider buying instead of renting.

My plan is to be here at least another 3 years (PhD programs can take 4-7 years). I’m leaning towards a condo townhouse, with 3 or 4 rooms total. I’ll live in whichever is the least desirable room, and hope to rent out the other rooms for $400 / month each (+/- a little bit if some are better or worse than the others). I’d *CONSIDER* a unit with a separate basement unit (which I might live in myself if I decide to splurge).

I’m hoping to get a property for less than $40k / room (which I suspect will make it far more likely that I buy a 4 bedroom townhouse than a 3). I’m ok with a condo townhouse (they seem quite a bit cheaper locally than houses, but if there’s a detached house selling cheap I’ll take a look). Ideally I’d like something within a 15 minute walk from the University of Waterloo or Wilfrid Laurier University (I can walk further if its closer to WLU), but would consider something up to 30 minutes walk away. I’d consider a property one bus ride away from the universities if it was a VERY good price. Cosmetic damage is ok, and more serious damage MAY be ok.

I’m hoping to keep better track of how much time I put into the house hunt this time. Currently I’ve looked at two properties and have invested about 2 hours in the process.

My plan is to put in offers on multiple properties, much as I did last time (I may elaborate on this in a future post, as I think its a really great idea).

Some of the downsides, which I’ll be happy to tell any agents / sellers asking how I arrived at my offer price, is that real estate is going down everywhere, including the Kitchener / Waterloo area. I’m hoping to deal with this by getting a good price on the purchase (and accepting the risk that it may keep dropping after my purchase). Many multi-unit buildings catering to students have popped up recently and there seem to be a number of vacancies in the properties around the campuses. I’ll deal with this risk by being willing to adjust my rents to whatever price point gets me tenants, being willing to add some extra amenities (such as wireless internet, cable TV and maybe a bi-monthly cleaning service) and being on-campus and hopefully able to recruit tenants from people I know and “friends of friends”.

If anyone knows of a property that meets this criteria, that is either currently available for sale or might be soon, please encourage the owner to contact me at cheapcanuck@gmail.com. I certainly won’t promise top dollar, but I’m not picky about the minor details, and will be ready to buy for the right price (cash offer, minimal conditions which will be quickly removed, flexible on closing date).

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{ 10 comments… read them below or add one }

1 MoneyEnergy

Pretty exciting; unfortunately I don’t have any recommendations for you (I’m sure you’ve scoured the MLS.ca site), but good to hear someone doing what my own plan is eventually. I’d be concerned, though, about taking on that much debt and responsibility while still in a graduate program (as I am). I’ve thought of doing this but it seems it would interfere with one’s studies? Isn’t there already too much to do with the PhD?:) Good on you though if you can!

2 Mr. Cheap

ME: That was my excuse for my first year in my program :-). I need to live somewhere for my time here, and I’d be willing to put the time in to find roommates while I’m here, so it seemed like something that was doable WHILE I’m studying, not something that will interfere with it (time will tell I guess). My condo is Toronto has been pretty “hands free” so I’m hoping this will be too (and that I may be able to keep running it when / if I leave town – this would definitely be harder for a student housing property, but we’ll see).

3 MLR

Once I find out if I am staying in my current city or being moved to another location… I plan on doing something similar.

Can’t beat living in a house and having your roommates pay the mortgage :)

Good luck!

4 ND

Waterloo, Ontario is one of the best places to buy an investment property in the province. I work as a mortgage specialist with a focus on helping people buy investment properties. The numbers look great there. Nice job. Looking forward to hearing more about your adventures.

5 Dean Barclay

You really are doing well owning property at such a young age. I own several rental properties in Kenora, Ontario and would love to purchase something bigger in Winnipeg but i find it really hard to get financing for such a big project. Do you have any ideas how to finance a larger building? I have good government job with secure pension etc. If anybody knows please email me.

6 Mr. Cheap

MLR, TStrump, ND: Thanks :-).

Dean: Thanks for your kind words! I’m a PhD student (not an undergrad), and I worked between my degrees, so I’m not really THAT young (early 30’s).

Have you looked into vendor financing? If you have at least 5% down, often they’ll consider financing you for larger building (since, as you’ve found, otherwise it’s tough to get financing).

You could hook up with a partner(s) and maybe qualify for a loan if there were more of you (I wouldn’t personally recommend this, but that’s a future post).

You could refinance your existing properties, then use that money to make a very large down payment on the building or buy it outright (depending on how much equity you have in your existing rentals). If you don’t have a lot, then you probably haven’t owned them for that long and I’d humbly suggest that it might be worth waiting for a while before pushing into larger buildings (which have their own challenges).

Also, you can talk to a mortgage broker (personally I deal with Canadian Mortgage Trends) and ask them what it would take for you to get financing (if they can’t do it for you themselves, I’m sure they’ll refer you to someone who can – they did this for my brother).

7 Dividend Growth Investor

Wow it’s a big step to get a second investment property. That’s one stream of alternative income where I lack knowledge. I do agree with you that college real-estate is somewhat recession resistant, as people are likely to go to school even if the times are tough..

I guess I would stick with REITs for now.. But I was wondering if you could point me out to any posts about your real estate ventures. How do you make your property hands-free? Do you hire a manager?

As for the new property, aren’t you afraid that the other tennants are going to constantly bother you with questions and asking you to fix stuff?

8 Mr. Cheap

DGI: My previous experiences are detailed in a series of posts collected under the title “Getting Started With Investment Real Estate” (on the sidebar).

It’s hands free just because its a condo (so the corporation handles all the outside maintenance) and I was quite careful picking tenants (and I got lucky that they actually HAVE been good tenants). I’ve never hired a property manager (and have heard enough horror stories that I’d be reluctant to do so).

I’ll be living in the property myself, so if there’s something that needs to be fixed, *I’LL* want it fixed too :-). I haven’t had calls to fix ANYTHING in my original condo in two years (I tried to make sure everything was in good repair when the tenants moved in).

Buying a REIT is a VERY reasonable alternative to buying real estate. I’ll probably do a post at some point detailing considerations between the two.

9 Nancy Kamau

Dear all,
Please can i get someone who can assist me by buying a house to avoid this stress of house rent. Thanking you in advance and God bless you.

10 Mr. Cheap

Hi Nancy: I’m curious, what sort of help are you hoping to receive?

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