We liked the area (walk score 95+) & it was probably the most reasonably priced place at the time. We made a spread sheet of the 18 we visited including projected Reno’s, rents & expenses. Overall, it was the best deal. It also helps that the tenants pay the utilities. Once we bumped up the rents it was just cash flow positive. I think that is very important. I would not buy something I had to inject $ into every month. We keep a separate bank account for the rental so it’s easy to keep it separate. We’ve had to “loan” it money for 2 major repairs but it’s paid us back within 4-6 months. We’re happy if it can carry itself & break even. Any extra $ it’s makes goes towards its mortgage. Once the mortgage is paid it will provide about $15-20K a year.
It has appreciated a lot but we don’t plan to sell. I’ve had relatives regreat selling RE so my plan is to just make money off the rents.
I don't know that is common in Canada but it is absolutely bananas in the states. Breaking even means earning zero dollars correct? So that large down payment I assume you made is earning nothing for the 10-20 years while you are paying down the mortgage? So It will cash flow nothing, and you are banking on appreciation for all of your returns I assume. This feels insanely risky but you have done well so far? Is this type of speculation somewhat common in the big cities in Canada?
It is speculation and it is risky compared to investing, which is probably why I know very very few middle class people invested in rentals in Canada.
Most people I know invested in RE here either work in the RE industry, or are high net worth, looking to diversify, and have a high risk tolerance within this asset class.
I literally can't think of anyone middle class off the top of my head who owns a rental property in a Canadian city, other than some friends who have bought a house with a suite that they can rent out to offset the mortgage.
Otherwise, between 20% down, the housing prices in Canadian cities, and the variability of our mortgages, it's not at all the same kind of investment that it is in the US.
Also remember, we have only a small handful of major cities, which is where the vast majority of jobs are. So our urban real estate market is kind of nuts as a result.
My expected gains on my rental are entirely speculation, but given what's happening where I own, it's actually a pretty safe bet.
Based on the past decade, had we just left it empty, we would be close to breaking even if we sold today, and my area is just starting to heat up.
Something extremely strange would have to happen for me to lose money, again, even of I just left it empty, based on the plans the city has for my area.
Even then, I'm only invested to diversify beyond maxing my tax advantaged accounts and to lock in the relatively low prices here as rent control for my parents who will be my tenants. I don't even factor this property in to my retirement planning. It's basically just a bonus.
So yeah, it's a different world here.