Any landlords on here..looking at buying an income property--good/bad idea

[lizamarie]

So I already have a condo for 7yrs and no other debt. I am pretty sure I will get approved for a house in my hometown as they are very cheap. The way I am thinking is that having an income property will help supplement my income when I retire (hoping for freedom 55--no kids yet and not married yet either..LOL). I have been told if I do this I would have to make sure I have someone reliable like a contractor to be able to call for emergencies on the house since it is over 3hrs away.

Am I out of my mind thinking of buying a 2nd house? I can put down 25% if needed, then home inspection, land transfer tax, lawyers-closing costs.

any and all thoughts & comments welcomed.

I even have a niece who wants to rent a house already--yes I have heard its a bad idea to rent to family.

[FallenPixels]

I don't have one, but if you can afford it, and the rental market is decent in the area it seems like a good investment

Personally, I would not rent to family, they are more likely to ask to pay rent late etc since you are family and understand their situation (not to say regular renters wouldnt do the same but it is easier to say no when your family are not involved)

[Zonny]

I'd be scared silly. I used to work a bit with the Residential Tenancies Board here, and saw some ugly stuff. If you get good tenants (and I do think that most renters out there are decent folks), then you're fine. But there can be tenants from hell, and here at least, it's very difficult to evict someone - mostly only if they're over 30 days in arrears in paying rent. If they pay it 29 days late each month, they're good to go.

[xlxo]

In addition to bad tenants... my concern is the 3hr one-way or 6hrs round trip to collect monthly rent. You should personally inspect the property, at least every 2 months to ensure it's not an illegal grow-op.

[FallenPixels]

I would personally not rent from someone who wanted inspections so often, we have an annual inspection and that is enough for me, I do not want to arrange to be at home at their convenience for an inspection

[xlxo]

Annual inspection? That enough time for 4 harvests at $60k each. But the landlord will see little of it as the house will be damaged from condensation, mold and chemicals. In some municipalities, the home/land will be forfeited to the government as proceeds of crime.

http://www.squareoneinsurance.ca/avo...juana-grow-ops
http://www.abbynews.com/news/121669964.html

BTW... you can forget about your home insurance... it's not covered...
http://www.obj.ca/Blog-Article/b/125...ijuana-Growops

[Cake]

Is living in that house part of your retirement plans? Do you make the 3 hour trip on a regular basis to visit family?
Those could be factors that would sway me to a yes.

[lizamarie]

wow 60K maybe I'm thinking of the wrong business..LOL...living in it probably not--but possibly retiring in that area is on my mind also, just thinking of the income afterwords (but yes I would still have to put some aside for repairs/renovations)....yes I try and go visit family every few months..I'm almost 36yrs and it could be paid off in 15-20yrs..I'm thinking I will go and have a looksy inside the few houses I've been watching

[travel-mum]

My recommendation is to buy a duplex, not a house, in your area and look into getting a property management company for the following reasons:
1. In a duplex there is usually a tenant in at least one apartment at all times to pay the mortgage. If you have a house, you may have some months between tenants and you have to come up with the mortgage payments yourself
2. If there are two tenants then you're less likely to have a grow op, because of the chance of being discovered by the other tenant
3. Our property management company doesn't charge too much, and they collect the rents, kick people out if they don't pay their rent, find us new tenants who have been thoroughly screened and make emergency repairs if we're not around to do it.
4. Buy a property in your area because properties need maintenance, the same as your home. You don't want to spend 3 hours driving to a property to find out you need a new hot water heater, etc., then arrange for a new one, then have to drive back another day to have it installed. And you don't want to pay the property management company to do anything except emergency repairs, as they charge a hefty price for that.
5. In our area duplexes are a hot commodity. Ours have increased in value at least 20% in the past three years. Not only do your tenants pay your mortgage, but as time goes on the property increases in value also. Hopefully by retirement we can use some of that rent as income.
6. You should always have a mortgage on your rental properties. Why? Because the interest you pay on rental property mortgages are a write-off, whereas interest on your home mortgage is not. So mortgage your rental property to the hilt and use that money to pay down your own mortgage. Or sell your home for a profit and buy another one with the rental mortgage money. Also, if you don't have a mortgage on the rental income then the rental income is taxed as direct income and you pay high taxes on that, without the write-offs of any mortgage interest you pay.
7. If you're handy buy a duplex that needs a little work, and then fix it up before you rent it. We've done that and increased the value of the property by thousands of dollars, with just a little money and elbow grease. We did it after work and on weekends. But be careful of the area you buy in. If it's a known crime area you'll have problems getting and keeping good tenants.
8. Make sure you have a thick skin. It's not easy being a landlord. It takes time and effort. enants always want something repaired, improved or changed. You have to decide what you're willing to do and what you're not, and stick with it. If you let them, tenants will bleed you dry with their wish list.

These are things just off the top of my head that you should consider.
I would never buy a house, only a multi-unit property.
I would never rent to family.
I would never buy far away from where I live.

[endi2000]

Actually - in BC the landlord can perform monthly inspections with proper notification and it is strongly recommended that they do an inspection every 3 months.

[luckbealady]

In addition to bad tenants... my concern is the 3hr one-way or 6hrs round trip to collect monthly rent. You should personally inspect the property, at least every 2 months to ensure it's not an illegal grow-op.

When I was renting a room in a town house, our landlord never collected cheques. We had to take them to the bank and deposit the rent into her account (I don't remember all the details we had, you'd have to contact your bank about that).

[tobiwobi]

I have a bad feeling about your particular situation because you mentioned that the houses are cheap in your hometown. I'm thinking then so are rents. And then there is one issue after another. Low rent tenants can be trouble. Are there lots of jobs and opportunities for people in your home town? If not really, then it may be difficult to find tenants. And yea, forget the niece, she will not be happy paying your mortgage off forever, so there is potential there for a bad family situation.

The other way around: if you said you'd like to rent the condo that you paid off, and buy a house in your home town, than that sounds like a good plan. But all the reasons you're not doing that are the same reasons it may be difficult to find a quality long term tenant in your home town.

[tobiwobi]

3. Our property management company doesn't charge too much, and they collect the rents, kick people out if they don't pay their rent, find us new tenants who have been thoroughly screened and make emergency repairs if we're not around to do it.
emergency repairs, as they charge a hefty price for that.

6. You should always have a mortgage on your rental properties. Why? Because the interest you pay on rental property mortgages are a write-off, whereas interest on your home mortgage is not. So mortgage your rental property to the hilt and use that money to pay down your own mortgage. Or sell your home for a profit and buy another one with the rental mortgage money. Also, if you don't have a mortgage on the rental income then the rental income is taxed as direct income and you pay high taxes on that, without the write-offs of any mortgage interest you pay.

Hi travel mum, thanks for sharing your experience. Do you mind me asking how much does the property management company charge? As a % of monthly rental income.

Also, just for completeness sake, mortgage interest is one of the deductions, for completeness sake here are the rest of them:
http://www.cra-arc.gc.ca/tx/bsnss/tp.../menu-eng.html

You can have the rental property in your name or you can register a company, so income taxes vary depending on specific situation.

[travel-mum]

You don't say where in Ontario you live. We live in a small city in eastern Ontario. Our property management company only charges us $35 per unit plus HST every month. I know in larger cities, though, they charge a lot more!

[tobiwobi]

You don't say where in Ontario you live. We live in a small city in eastern Ontario. Our property management company only charges us $35 per unit plus HST every month. I know in larger cities, though, they charge a lot more!

yea I am in Toronto. management companies keep soliciting business but i've never bothered to ask how much they charge, too scared that they will pester me even more. So you're paying $420 annually, and they do " they collect the rents, kick people out if they don't pay their rent, find us new tenants who have been thoroughly screened and make emergency repairs if we're not around to do it.".

And I think you said they charge extra for repair calls? The monthly fee includes being on call 24/7, but not actually the work itself? If I understood correctly.

Just to give you an idea what I'm doing, I've joined Ontario Landlords Association for free, got accredited as a legit landlord to be able to screen applicants through tenant verification service, so I can myself run credit reports and criminal checks on applicants, they cost $20-30 per report or less.

Real estate agents typically charge one month rent as fee for finding a tenant, and I was going to use them but then I've heard stories of people being stuck with bad tenants that were found through agents, so to me it appeared that I pay the agent, and they're gone and I'm still managing all the risk associated with the tenant not working out. So i'm glad I found the ontario landlords association, they also have a forum where landlords share experiences and stories.