Your triplex’s GRM of 107 ($300K / $2800) seems quite expensive to me compared to the unit I posted about in Thunder Bay. Are you sure the property is worth paying such a premium for? Have you looked at other properties available in Thunder Bay?

Currently this property boasts a POTENTIAL (be suspicious) income of $5500 / mo, while this property claims to be making over $2,500 / mo NET.

Both have an asking price of $300K and, on paper, either of these looks MUCH better than your triplex…

We both have pensions, contribute to TFSAs and RRSPs, and still have good cash flow given that we don’t live beyond our means. We bought our place for about $105k four and a half years ago and have been making smart renovations. Our place is probably worth $150k+ right now (with 20k invested).

I keep thinking that the money we keep sinking into TFSAs would be better spent on an emergency fund for a rental property instead (or put it toward a second vehicle for convenience).

We found a tri-plex for $300k that brings in about $2,800/m in rent. The owners (who we know pretty well) recently retired and want to sell. They’ve lived there for 17 years — and one of their tenants did too! The tenants they attract are professionals (doctors, lawyers, teachers, etc.) so they’ve never had any issues there.

The place is pretty well maintained and keeping it rented shouldn’t be an issue. Thunder Bay’s vacancy rate is only 2.6%, which ranks pretty high amongst the cities tracked by CMHC.

The only problem is the new 20% down payment rule. Like I said, our cash flow is pretty good but we’re certainly not sitting on $60,000! We’re going to speak with a bank next week to examine our options. I’m not a huge fan of leveraging to invest, however, I do believe that it takes money to make money in today’s economy…

I really like the idea of paying down that house in 15 years (we’re only 30 years old right now) and having a $300,000 property that earns $30k per year paid off totally by renters. It might just cover our future childrens’ educations!

Comparing that to what I’ll have after socking away money in our TFSA over the same period makes it seem like a no brainer. Am I missing something major here?!?

A no brainer with a bit of risk mind you… Carrying two mortgages is a big step. But like you said, I don’t think Thunder Bay is going to become a ghost town any time soon.

Actually, our city was ranked along with Kitchener as the most undervalued real estate market in all of Canada by Maclean’s a couple years ago. In the past couple years Thunder Bay has started growing again and the real estate values have jumped by as much as 20% (market correction).

Most students want everything included (utilities, cable and especially internet). When we took a look at what landlords were charging, most of them were charging the same rate whether it was an apartment in a home or whether it was an apartment in a building. When we did the math we couldn’t go with what most were doing or we’d lose our shirts. So we decided to charge more. The purchase on the property will close in a few days and we already have a tenant. We will see how it works out over the next 12 months.

Cheers,

Diamond Run

If the area swings around and prices shoot up, sell your properties and repeat this in another down market. If the area doesn’t improve, just keep collecting rent.

The obvious danger would be if the area keeps going downhill and it becomes harder and harder to find people to rent to (and eventually your properties might be worthless) – probably pretty unlikely except in fairly small communities (Thunder Bay isn’t going to turn into a ghost town).

Five years ago when we bought our properties the cash flow was unreal ($2100 gross monthly on a $140k property). Now, after a few years of little to no growth in RE values, many people in the area around the university converted their homes to student rentals and obviously there’s more to choose from so prices have come down.

If you’re close to the university, rooms rent for ~$300-$400 room, utilities included (this is where the cashflow has decreased over the past few years – kids are generally not willing to pay util.). Five years ago you’d be surprised what passed as a “bedroom” – kids are much more pciky these days.

A former classmate of mine bought up 10-11 rental houses within a few years time of graduating. In the early days, it wasn’t unusual to net $1000/mth per property.

I’ve heard through the grapevine recently that he has since quit his engineering job…

How did you go about acquiring your first rental property? Did you purchase your own home first?