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    Default Rental Property Income

    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?
    Originally posted by beyond_ban
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    Quote Originally Posted by nj2Type-S View Post
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    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.
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    Quote Originally Posted by LilDrunkenSmurf View Post
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    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.
    Originally posted by beyond_ban
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    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.
    Last edited by Rarasaurus; 05-28-2019 at 02:13 PM.

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    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.

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    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.

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    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?

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    2 bedroom beach condo on the lake in Kelowna.

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

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    Quote Originally Posted by Rarasaurus View Post
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    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
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    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.
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    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
    Last edited by Asian_defender; 05-28-2019 at 02:28 PM.

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    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?

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    Quote Originally Posted by realazy View Post
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    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.
    Originally posted by beyond_ban
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    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.
    Last edited by Rarasaurus; 05-28-2019 at 03:29 PM.

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    Quote Originally Posted by Rarasaurus View Post
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    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.
    Originally posted by beyond_ban
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    Just keep it, don’t make an even bigger mistake and sell at the bottom of a 5yr cycle

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    Quote Originally Posted by ercchry View Post
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    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.

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    I make $550 a month on my property

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    Quote Originally Posted by nj2Type-S View Post
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    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.

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    Quote Originally Posted by Xtrema View Post
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    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.
    Originally posted by beyond_ban
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