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
I just received an electric bill from one of the rental ‘house’ meters for a total of $324.12. This issue is that this bill has never topped $210 up until now. I’m concerned because this can seriously affect my rental’s profitability, especially when my margins are already thin.
Now, I should give you a bit of background on this since I’ve recently made some changes to the set-up of this building. When I bought the triplex, my house meter powered the common area lights, the laundry room, and the furnace room. I paid for the heat via two oil fired forced air furnaces and an oil fired hot water tank. In August I installed a second oil tank and a 60 gallon electric hot water heater in order to split the heating of the units independently (the basement has electric baseboard heat).
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Steve Rental Profit Operating Costs, Utilities
So I know that getting on the property ladder is probably one of the hardest financial things you’ll ever do in your life so I figured I’d share my story. It’s a bit unconventional, so maybe that’s what makes it interesting.
First of all, I live in Canada so your mortgage rules are likely different if you live in the US or anywhere else. Also, I bought my first place nearly three years ago and we all know what’s been happening with the banks lending rules – can you say belt tightening?
Anyway, back to the story. When purchasing a home in Canada that is ‘owner occupied’, I only needed a down payment of 5% of the purchase price. This amount varies based on the number of units in the building, the bank, whether or not this is your first home, and so on. CMHC (who insures mortgages that are more than 75% financed) normally lays out these requirements. You should keep in mind that your mortgage insurance premiums rise when you finance more of your purchase. The good news is that this amount is rolled into your mortgage so you don’t have to pay for it up front.
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Steve Financing, Rental Profit
