Photo: Flickr user ellievanhoutte
For a while there things were going pretty well. I had evicted a troublesome tenant, I was fully rented, and most importantly I was collecting rent from everyone more or less on time. In December when I went by to collect rent, one of my tenants informed me that she’ll be moving before the end of the month. First, off she didn’t give me the required notice period (her lease does not expire until June 2010), and second she didn’t even pay me a full month’s rent. She thought she only needed to pay 1/2 rent and I just keep the damage deposit. Great.
This is a real pain because this particular unit is the hardest of all my units to rent. It’s a decent apartment, but it is a basement unit and on the small side. Because of that I can’t put a more mature family in there as it’s really too small for any more than two adults and a couple of young children. Also most people are put off by basement units, even though this one is quite bright, clean, and dry. On top of this, Christmas is around the corner and it’s really hard to rent a place at this time of year; I’m busy with my holiday running around and prospective tenants aren’t that inclined to look either.
So even though my tenant technically owes me rent until the end Read more…
Steve Cash-flow, Rental Profit Profit, Vacancy
Photo Flickr user: inacentaurdump
Good news! My mortgage application has been approved and I’m going to be able to tap into some of the home’s equity and pull out some extra cash. This is incredibly good news, you see. Both of my rental properties are currently up for sale and my projected ‘net income’ (before capital gains taxes) would be no more than $20,000. With my new mortgage I’m able to access more than $25,000 in cash without any tax implications (until I sell). On top of that, I’ll actually double the monthly profitability of the building, keep my assets, and the passive cash-flow. Oh, and of course the head-aches, but this stuff doesn’t happen without some effort.
This dream scenario is possible because I bought the building with 100% financing three years ago. That meant I traded a down-payment for an exorbitantly high interest rate of 7.35% with Xceed Mortgage. This is a self-insured mortgage, meaning that CMHC didn’t provide the insurance for this high-ratio mortgage, Xceed did. I still had to pay an insurance of sorts in the form of a ‘fee’ that roughly equaled what I would have paid CMHC. This high ratio mortgage, on a 3 unit rental property, that was not owner-occupied would never have met
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Steve Cash-flow, Financing, Rental Profit, Rental Property Financing, Interest Rate, mortgage, Mortgage Payment, Profit
Attribution: Flickr user jurvetson
Ever since I purchased my first rental property I’ve been mentally conflicted about the best way to grow my rental portfolio while making money (cash-flow positive) and creating equity. In my experience positive cash-flow investments seem to be mutually exclusive of potential for great equity gains, especially in the short term. The investment opportunities I’ve come across that are revenue positive without the requirement of a large down-payment tend to be in ‘rough’ neighborhoods where the purchase price is low enough to generate great returns on your rent. Conversely, up and coming neighborhoods tend to yield much higher purchase prices and rents need to be in line to compensate. When I run the numbers, they just don’t seem to make the grade.
The trouble with the hood (as I like to call it) is that the investment is great on paper, but in reality it’s much more work. Read more…
Steve Cash-flow, Rental Property Cash-flow, equity, Rental Property
