Rental Property Income

[nj2Type-S]

This thread sort of stems from the other thread about "renting to young families".

I have a townhome as a rental property. For the the past 4.5 years now, I've rented it out to 3 different tenants. Fortunately for me, I have not come across any major issues with any of my tenants.

However, this townhome has never generated any income for me. On top of the rental fee, I pay around $150 out of pocket monthly to cover the cost of the mortgage, insurance and condo fees. My tenants are renewing their lease in July, so I'm good for another year.

I've thought about cutting my losses and just selling the property next year, so I can use the little equity that it has towards my current mortgage, but the real estate market is still pretty crappy for sellers; I can probably make only around 30k after realtor fees, if I were to sell it in the near future.

Out of curiosity, do your rental properties generate income? If so, how much? If not, how much do you pay out of pocket?

[LilDrunkenSmurf]

This thread sort of stems from the other thread about "renting to young families".

I have a townhome as a rental property. For the the past 4.5 years now, I've rented it out to 3 different tenants. Fortunately for me, I have not come across any major issues with any of my tenants.

However, this townhome has never generated any income for me. On top of the rental fee, I pay around $150 out of pocket monthly to cover the cost of the mortgage, insurance and condo fees. My tenants are renewing their lease in July, so I'm good for another year.

I've thought about cutting my losses and just selling the property next year, so I can use the little equity that it has towards my current mortgage, but the real estate market is still pretty crappy for sellers; I can probably make only around 30k after realtor fees, if I were to sell it in the near future.

Out of curiosity, do your rental properties generate income? If so, how much? If not, how much do you pay out of pocket?

I think you can claim that $150/month as a loss on your taxes.

[nj2Type-S]

I think you can claim that $150/month as a loss on your taxes.

Basically, the the only benefit of having my rental property at the moment is for tax purposes lol. I haven't made income, so that loss does help my personal taxes.

[Rarasaurus]

Subsidizing a property over your monthly costs doesn't mean a loss. The principle paydown on your mortgage counts as taxable income. This is where you make money in the long term as you pay down the principle. I would anticipate that principle paydown is in the range of 800 a month, so even with your top up of 150 you would still gross 650 gain on paper.

I would say it is hard to cash flow a property in this market unless its suited and even then maybe not. If we are talking something that was bought in the last 10 years.

[jwslam]

I'm cashflow negative by about $100/m on my condo. And then lump on the tax portion.

It was a stupid choice I made a few years back but it's pretty much a forced savings plan for myself.

[Twin_Cam_Turbo]

Mine has never been cash flow positive but I’m contributing around $800/month onto the principle, and I could sell for about $15k more than purchase price all said and done now if I had to.

[realazy]

You really have a negative income?

Most people are negative cash flow but are still positive income. Do you have a very high loan to value ratio? (5% down?) Does the building have very high condo fees? Was the unit vacant for a few months?

[BavarianBeast]

2 bedroom beach condo on the lake in Kelowna.

Make $10,000 year after all expenses and stay in it 3 weeks a year.

[dirtsniffer]

Subsidizing a property over your monthly costs doesn't mean a loss. The principle paydown on your mortgage counts as taxable income. This is where you make money in the long term as you pay down the principle. I would anticipate that principle paydown is in the range of 800 a month, so even with your top up of 150 you would still gross 650 gain on paper.

I would say it is hard to cash flow a property in this market unless its suited and even then maybe not. If we are talking something that was bought in the last 10 years.

Quoting because it's right.

Were cash flowing negative $150 a month on ours, but putting $650 towards principle. Assuming the market is stable over the next few years it will have been worth it

[msommers]

If I could sell my rental with +30K after fees I'd do it tomorrow.

Myself and many others who are renting condos are negative cash flow to some degree right now unless they bought quite awhile ago. I think the allure of AirBnB is keeping some from selling honestly.

[Asian_defender]

I am out of pocket $500/month for mine. I'm use to it now and it isn't generating any headaches so whatever
Condo fees for my 620 sq ft are $380/month out of the keynote one tower.

All in all I don't think its a bad investment, as like many have said its a forced savings account

[gwill]

I kicked out really good tenants out of one of my rentals and regretted it afterwards as I didn't end up selling the property. After the 4th offer fell apart I said screw it.. time to rent it again.

If you have good tenants why worry about selling? How familiar are you with the townhomes condo situation?? Are you on the board?

[nj2Type-S]

You really have a negative income?

Most people are negative cash flow but are still positive income. Do you have a very high loan to value ratio? (5% down?) Does the building have very high condo fees? Was the unit vacant for a few months?

My mistake. I meant to say "negative cash flow", and not "negative income".

I bought it in 2007, when the market was at its peak, and I only put 5% down. It was only vacant for 2 months out of the 4.5 years of renting.

I put around 17k downpayment, and in the course of 4.5 years, I've paid around 11k out of pocket, including the 2 months it was vacant. Just to break even, I need to at least to make 30k after realtor fees.

[Rarasaurus]

Investment wise you bought at a peak which was a bad move. The renter essentially paid down 25g of the negative equity you had in the place over 5 years and helped a ton. I would offer the opinion that you are making the same bad move by selling in a buyers market.

Projecting forward 10 years I roughly calculate that you would save $16g in interest by paying down your mortgage by 30g and putting in the extra 150 a month. If you keep the rental you would have about 50g additional principle paydown by the tenant. Equity wise to me it seems you are 3x better with the rental. Of course barring bad tenants or repairs on the downside or property appreciation on the upside.

[nj2Type-S]

Investment wise you bought at a peak which was a bad move. The renter essentially paid down 25g of the negative equity you had in the place over 5 years and helped a ton. I would offer the opinion that you are making the same bad move by selling in a buyers market.

Yeah, it was a big mistake buying in 2007, but I just got married and we wanted to buy a place. Should've just rented, in hindsight lol.

There's no real reason why I want to sell in the near future, aside from 1) I've been spoiled in that all my tenants have been great, and would hate it if my current tenants move, and 2) Maybe I can try to pay off my primary residence faster.

[ercchry]

Just keep it, don’t make an even bigger mistake and sell at the bottom of a 5yr cycle

[Rarasaurus]

Just keep it, don’t make an even bigger mistake and sell at the bottom of a 5yr cycle

Agree and due to this I would assume property appreciation in the coming 10 years vs flat in my example above.

[SJW]

I make $550 a month on my property

[Xtrema]

I put around 17k downpayment, and in the course of 4.5 years, I've paid around 11k out of pocket, including the 2 months it was vacant. Just to break even, I need to at least to make 30k after realtor fees.

If it's 5% down in 2007, do you have more equity than 5% today after 12 years of mortgage payments? Or did you take it out on renewal?

Trying to reverse your numbers:

$17K as 5%, your mortage is $323K on a $340K property.

5% rate at 25 years amortization, by 2017, you would have paid close to $84K into principle. So you should only owe ~$240K left. May be even less today.

Say your property is worth 10% less and sold for $300K, after realtor fees, you should still get around $280K. So you can have $40K back.

In a way, you still make $10K, over 12 years, even after you put in $28K.

[nj2Type-S]

If it's 5% down in 2007, do you have more equity than 5% today after 12 years of mortgage payments? Or did you take it out on renewal?

Trying to reverse your numbers:

$17K as 5%, your mortage is $323K on a $340K property.

5% rate at 25 years amortization, by 2017, you would have paid close to $84K into principle. So you should only owe ~$240K left. May be even less today.

Say your property is worth 10% less and sold for $300K, after realtor fees, you should still get around $280K. So you can have $40K back.

In a way, you still make $10K, over 12 years, even after you put in $28K.

You're pretty much bang on! That's the thing, 10k over 12 years doesn't seem like a pretty good return. It's exactly why I was considering selling it and put my money elsewhere.

But as some of you had mentioned, it's not really a seller's market, so I may just keep it for a bit longer.

[Xtrema]

You're pretty much bang on! That's the thing, 10k over 12 years doesn't seem like a pretty good return. It's exactly why I was considering selling it and put my money elsewhere.

It's still worked out to be 3% return in a tax deferred/free portfolio even in this depressed market (although, you basically work for free managing the rental). But you got it in absolute peak that we really never recovered to that point, not even in 2011/12.

At least you paid yourself for the 1st 8 years when you lived there instead of some landlord :D And rent was pretty crazy from 2011 to 2015.

[88CRX]

You're pretty much bang on! That's the thing, 10k over 12 years doesn't seem like a pretty good return. It's exactly why I was considering selling it and put my money elsewhere.

But as some of you had mentioned, it's not really a seller's market, so I may just keep it for a bit longer.

Its not a good return overall; but a profit is a profit.

I had a townhouse, bought at the similar time, very similar $$ numbers that I rented for several years and finally had enough dealing with it. Cut my losses (minimal gains I guess) and sold it last summer. Jordan did an amazing job selling it for a reasonable price all while the tenant was still living there.

I kept holding onto it because the overall return was shit (exactly like you) but I honestly didn't think it was ever going to appreciate from 2007 so I got out.

[stealth]

.

[C4S]

2 bedroom beach condo on the lake in Kelowna.

Make $10,000 year after all expenses and stay in it 3 weeks a year.

Is it as AirBnB ?

Renting a condo out in Calgary now is pain in the butts .. high tax, increased high condo fee, after all, only $ few G/ year in my pocket, I know B.C. is still doing good, especially BnB ... but not sure if it is risky, I am more conservative ..

My agent suggested me to buy condo near by SAIT, UofC, or even Mount Royal, great return of investment, but I worry about if rent to young students (what if 6 if them share a two bedroom! LOL)

Love to own a place in Kelowna too! (already give up the plan to buy a condo in Vancouver .. lol)

[sabad66]

i'm about -500 cashflow but about +200 income. I didn't want to be a landlord, but had trouble selling my townhouse (listed in the worst two months of the year Jan and Feb) and didn't want to hold out any longer.

I got pretty lucky with my tenants wanting to do a 2 year lease so i accepted with the hope that things improve by then assess the situation then.

[Xtrema]

My agent suggested me to buy condo near by SAIT, UofC, or even Mount Royal, great return of investment, but I worry about if rent to young students (what if 6 if them share a two bedroom! LOL)

Area immediate around UC tends to hold prices well. And near Foothills also guarantee more medical professionals/students as tenants.

But who knows, been driving around the new condos in University District, seems empty for now. I'm eyeing phase 2 after the main street is built. May be a good retirement townhouse if I don't retire in Kelowna like the rest of the country.

The 1st phase townhouse feels too tightly packed IMO.

[Rocket1k78]

Ft. McMurray so worse than Calgary.

Townhouse purchase price of $425k + CMHC = $445k (0 down 40 year mortgage).

$350K left on the mortgage today. Current value: $200-220K.

Mortgage amount: $2100/m
Condo Fee: $550/m
Water: $100/m
Power/Gas: $350/m

Total Cost: $3100 a month.

Rental Income: $2100 a month.

Bought during the boom in 2007, should of sold when I left Ft. Mac but was making good rental income at the time until the last oil crash. Biggest mistake.

Sorry for saying this but thats a bad situation. 150k negative is insane. Ft Mac was a feeding frenzy and i recall seeing people renting out their driveways for rv's or something like that. Mind if i ask what you were getting at the peak?




I didn't want to be a landlord, but had trouble selling my townhouse
Exact same thing with me, i was 25 and no where near ready to be a landlord so i listed it for sale using my friend who was a new realtor(mistake and blessing). FFWD 2 years later my property has almost doubled in value, im now a landlord and im taking the tenant to court because i was too scared to carry 2 mortgages so i took the first guy that said yes.

[bjstare]

Ft. McMurray so worse than Calgary.

Townhouse purchase price of $425k + CMHC = $445k (0 down 40 year mortgage).

$350K left on the mortgage today. Current value: $200-220K.

Mortgage amount: $2100/m
Condo Fee: $550/m
Water: $100/m
Power/Gas: $350/m

Total Cost: $3100 a month.

Rental Income: $2100 a month.

Bought during the boom in 2007, should of sold when I left Ft. Mac but was making good rental income at the time until the last oil crash. Biggest mistake.

Leveraging the shit out of yourself was the real mistake. 0 down, 40 years is :nut:

[ExtraSlow]

Leveraging the shit out of yourself was the real mistake. 0 down, 40 years is :nut:

That's a pretty risky move in any location or market. Most people with zero down rent and save money for a down payment.

[BavarianBeast]

Is it as AirBnB ?

Renting a condo out in Calgary now is pain in the butts .. high tax, increased high condo fee, after all, only $ few G/ year in my pocket, I know B.C. is still doing good, especially BnB ... but not sure if it is risky, I am more conservative ..

My agent suggested me to buy condo near by SAIT, UofC, or even Mount Royal, great return of investment, but I worry about if rent to young students (what if 6 if them share a two bedroom! LOL)

Love to own a place in Kelowna too! (already give up the plan to buy a condo in Vancouver .. lol)

No, it's not AirBnB. It's called Casaloma resort and has an excellent management team that takes care of the rentals. I kind of lucked out when it came up for sale as they are nearly impossible to get a hold of and are usually purchased internally by other owners.

http://www.casaloma.com/accomodations/

I wouldn't bother looking there though because I'm buying another unit as soon as ones available!

[RX_EVOLV]

Leveraging the shit out of yourself was the real mistake. 0 down, 40 years is :nut:

I have no idea you can do 0 down OR 40 years.... Always thought it's 5% and up to 25-30years...

[Rarasaurus]

I have no idea you can do 0 down OR 40 years.... Always thought it's 5% and up to 25-30years...

You could for a couple years in 2005 to 2007 with 0% and 40 years. 35 year mortgaged ended around 2012 I think.

[ercchry]

I have no idea you can do 0 down OR 40 years.... Always thought it's 5% and up to 25-30years...

They use to call it the mirror test... put a mirror under the applicant’s nose, if they fogged it then they were approved :rofl:

[stealth]

They use to call it the mirror test... put a mirror under the applicant’s nose, if they fogged it then they were approved :rofl:

This.

I was 20 years old at the time. I had a monthly mortgage subsidy by the company I was working for. For the 3 years I lived in Ft. Mac I paid maybe a $200-$300/month out of pocket to live in the town house.

I did rent for the 1st 8 months a tiny bedroom in a townhouse with 4 other guys for $850 a month.

Rocket1k78 $3300 during the peak was normal for my area. I settled for good tenants at $2600.

[Rocket1k78]

This.

I was 20 years old at the time. I had a monthly mortgage subsidy by the company I was working for. For the 3 years I lived in Ft. Mac I paid maybe a $200-$300/month out of pocket to live in the town house.

I did rent for the 1st 8 months a tiny bedroom in a townhouse with 4 other guys for $850 a month.

Rocket1k78 $3300 during the peak was normal for my area. I settled for good tenants at $2600.

FWIW i would've done the same thing as you, you were super young, making insane money and the company was paying a big portion of your mortgage, pretty damn hard to pass up at that age