Buying duplex in vancouver

[hi-revs]

So im around the age to be thinking about buying real estate.
Im thinking about buying to RENT OUT the entire place.
This will be a 3-5 year old DUPLEX in VANCOUVER.
Price range around the 500k- 600k range before taxes.

Few questions,
Would a DUPLEX be a good first time home owners investment?
Is it hard to rent out duplex's since its not as spacious?
How would it differ from buying a "normal" detached house and renting out?

Im thinking about putting down roughly 100k.

Anything i should consider or need to know?

Thanks.

P.S. ANY info would help since this will be my first time buying! ANYHTING! From legal stuff to renting out etc...

[taylor192]

1. How much are rents for each side of the duplex? I'm guessing low since to buy a duplex that cheap you'll be a less desirable area of the city.

2. Does the rent cover:
- mortgage
- property taxes
- income taxes (you pay income tax on the equity paid down on the mortgage)
- insurance

3. If the rent does cover everything above, how much cash flow are you expecting?
- On a typical 35yr, 4% mortgage you're looking at $1800 mortgage payment, $300 property tax, and $100 insurance. If you can rent both sides for $1500 you'll clear $800 profit. That would be pretty good, yet I doubt in an area selling a duplex for $500K that you'll get $1500/mn rent.

4. Will you make more just investing the $100K?
- Consider you can invest your $100K at 7%, you need to return $7K/yr.
- Will the mortgage be paid down and cashflow equal $7K/yr?
- Consider a 25yr mortgage (4%) on $400K is paid down ~$10K/yr
- Consider a 35yr mortgage (4%) on $400K is paid down ~$6K/yr

5. Also consider you have to make enough profit to cover:
- 5% commission to eventually sell ($25K)
- lawyer fees x2 to buy, then sell ($2K)
- land transfer tax ($4K)
- CMHC fee (1% or $5K) since $100K won't be > 20% down after fees and taxes
- Thus you've got to be $36K ahead just to break even at the end

6. Consider vacancy rates:
- vacancy rates are up in Vancouver recently, and rents have dropped a bit
- expect more of the same as the Olympics winds down and people leave the city
- every month your place sits empty, you lose $$$. How many months would it take to erase all potential equity/cashflow? ontop of the $36K you'll face to eventually sell

7. Consider the hassles of tenants.
- tenants suck. I'm selling my investment property cause its a hassle and doesn't turn enough cash flow to be worth it.

[taylor192]

Read every post in this thread:

http://www.revscene.net/forums/buyin...t-t584770.html

[Wetordry]

Can your total gross monthly income (Work + Rental) combine to make at LEAST $8200?

Simple calculator using BMO website shows:

Monthly income $8200 (annual ~~$98.4k)
Monthly Credit Card Payments $1
Monthly Property Taxes $1
Monthly Heating Costs $1
Annual Fixed 5yr closed 5.49%
Amortization Period 25 years
Downpayment: $100k

Then they will let you borrow $400k

[taylor192]

Originally Posted by Wetordry

Can your total gross monthly income (Work + Rental) combine to make at LEAST $8200?

Simple calculator using BMO website shows:

Monthly income $8200 (annual ~~$98.4k)
Monthly Credit Card Payments $1
Monthly Property Taxes $1
Monthly Heating Costs $1
Annual Fixed 5yr closed 5.49%
Amortization Period 25 years
Downpayment: $100k

Then they will let you borrow $400k

He's admittedly a first time buyer, so he can use his own income to qualify, and any rent to make up the difference. I see no problem with him getting approved, yet a big problem with this as a good investment unless the rents are high.

[hi-revs]

Originally Posted by taylor192

1. How much are rents for each side of the duplex? I'm guessing low since to buy a duplex that cheap you'll be a less desirable area of the city.

2. Does the rent cover:
- mortgage
- property taxes
- income taxes (you pay income tax on the equity paid down on the mortgage)
- insurance

3. If the rent does cover everything above, how much cash flow are you expecting?
- On a typical 35yr, 4% mortgage you're looking at $1800 mortgage payment, $300 property tax, and $100 insurance. If you can rent both sides for $1500 you'll clear $800 profit. That would be pretty good, yet I doubt in an area selling a duplex for $500K that you'll get $1500/mn rent.

4. Will you make more just investing the $100K?
- Consider you can invest your $100K at 7%, you need to return $7K/yr.
- Will the mortgage be paid down and cashflow equal $7K/yr?
- Consider a 25yr mortgage (4%) on $400K is paid down ~$10K/yr
- Consider a 35yr mortgage (4%) on $400K is paid down ~$6K/yr

5. Also consider you have to make enough profit to cover:
- 5% commission to eventually sell ($25K)
- lawyer fees x2 to buy, then sell ($2K)
- land transfer tax ($4K)
- CMHC fee (1% or $5K) since $100K won't be > 20% down after fees and taxes
- Thus you've got to be $36K ahead just to break even at the end

6. Consider vacancy rates:
- vacancy rates are up in Vancouver recently, and rents have dropped a bit
- expect more of the same as the Olympics winds down and people leave the city
- every month your place sits empty, you lose $$$. How many months would it take to erase all potential equity/cashflow? ontop of the $36K you'll face to eventually sell

7. Consider the hassles of tenants.
- tenants suck. I'm selling my investment property cause its a hassle and doesn't turn enough cash flow to be worth it.

Thank you for this GREAT info!

Im just fishing for peoples opinion/info before deciding for my own.

Now, 600k is an amount that i can already put out in cash.
Being that this is my first time home owning, i want to play it "safe" and just put 100k of my own money into it.

Location is pretty decent as well.
The 3 houses that im looking at, downtown robson can be reached within 15- 20mins of driving the limit.
All of them are located on the East side of Vancouver.

From consider what Taylor said, about how much i can rent them out and how much i can profit makes me a little hesitant. It would be completely different if i was living in it myself.

Considering what you know now. what do you think? Invest in one property or leave the cash in investments at the bank?

[Bonka]

You may want to scour rental ads for the area to see what rental rates range from. The kind of tenants you're looking to attract should be considered in what type of property (and location) you're looking into. East Vancouver is predominately students and those in the lower-middle income bracket so bear in mind short-term tenancy is common. Certain areas in East Vancouver appear to have excess rental supply (as Taylor mentioned) as existing tenants are buying homes themselves - there have been quite a few timely additions of new construction inventory added to the market recently and you can bet a good portion of those purchasers are investment speculators.

Today's tenants are also particularly fussy so even if cashflow is positive, find out if it's worth your time to handle every little issue they have (or pay a management company to deal with it).

What are also your goals in owning a cashflow property? I would imagine that you plan to hold longterm if you're buying at today's top dollar. Right now we are heading into a transition stage with the Olympics and HST coming so if you have your doubts, continue doing your homework now and watch.

[taylor192]

Originally Posted by hi-revs

Considering what you know now. what do you think? Invest in one property or leave the cash in investments at the bank?

Unless you're willing to post more info, any further advice is limited.

Where exactly is the property?
What are current rents in that neighbourhood?
What's the current vacancy rate there?

If you have $600K cash, you're on the wrong site asking for advice. With that much money you should beable to buy 10% returns for little risk, much better than any real estate investment.

[Wetordry]

Rental demand really depends on location.

You can easily rent your place if its:

- near skytrain stations
- commercial drive
- big bus routes (hastings / main / broadway), especially if located one block away from a bus stop

As stated in previous posts, renters will be students or low income families / individuals, so you will have to choose your tenants wisely.

From personal experience, a 600sq ft suite in East Van can generate around $950-$1000 / mo.

Another thing to consider is rent can only be increased by 3.2% annually.

[Ride]

are looking to buy the whole duplex or one side of a duplex? Because 600k sounds too low for a double sided duplex in Vancouver.

[taylor192]

Originally Posted by Wetordry

Another thing to consider is rent can only be increased by 3.2% annually.

I think its been 1.9% and 1.6% the last 2 years. It changes every year.

[taylor192]

Originally Posted by Ride

are looking to buy the whole duplex or one side of a duplex? Because 600k sounds too low for a double sided duplex in Vancouver.

That was my thoughts, there's no way its within 20 mins of downtown. Maybe in Surrey or Delta.... that's still a big maybe.

[Wetordry]

Originally Posted by taylor192

I think its been 1.9% and 1.6% the last 2 years. It changes every year.

True it changes every year, but the rule of thumb the RTR uses is inflation +2%

OP's house choice would be something similar to this:

http://www.realtor.ca/propertyDetail...ertyId=8747496
http://www.realtor.ca/propertyDetail...ertyId=8626061

If you want a pure income generator, this looks good as well (& its BIG @ 2000 sqft):
http://www.realtor.ca/propertyDetail...ertyId=8986555

[hi-revs]

Originally Posted by Wetordry

OP's house choice would be something similar to this:

http://www.realtor.ca/propertyDetail...ertyId=8747496

Thats actually one of them that im looking at
plus a couple more really similar looking ones.

[Ride]

Originally Posted by hi-revs

Thats actually one of them that im looking at
plus a couple more really similar looking ones.

that's apparently the price for 1 side only, you can double the price for both sides.

[taylor192]

Originally Posted by Wetordry

If you want a pure income generator, this looks good as well (& its BIG @ 2000 sqft):
http://www.realtor.ca/propertyDetail...ertyId=8986555

That is the best deal, yet I would need to see it to believe it. 2000sqft for 6 bdrms, 5 baths and 3 suites means small rooms and small suites. I don't believe the rental figures are correct for the area, they seem inflated.

[taylor192]

Originally Posted by hi-revs

Thats actually one of them that im looking at
plus a couple more really similar looking ones.

Thus you're looking at a 1/2 duplex, not a duplex.

I don't think you'll return enough on your investment to make it worthwhile. You could probably turn a small profit with a large downpayment, yet you'd have to decide if minimal returns on a large investment are worth it. I personally don't think so thus why I'm selling my investment property at what I think is close to peak prices.

[freakshow]

Taylor, since we work so close, I really gotta take you out for beer to pick your brain!
Sort of on topic with the OPs thread, if you have 100K cash, whats the best way to get 7% return?

[hi-revs]

^^ i'd like to know too

[taylor192]

Originally Posted by freakshow

Taylor, since we work so close, I really gotta take you out for beer to pick your brain!
Sort of on topic with the OPs thread, if you have 100K cash, whats the best way to get 7% return?

I'm game for beer anytime, PM.

Good question, I'll tell you when I sell my house and have $100K to invest.

I will be seeking out a good financial adviser at that time. Right now I have $50K essentially parked in cash cause I'm not sure where to put it either. I did so well with equity and tech stocks/funds the last 6 years that I'm comfortable with it sitting on the sideline now not making any returns until I figure out what's best to do with it.

I feel more bad economic news is coming, and need to learn more about making solid investments. I admittedly took advantage of the runup of stocks the last 6 years without knowing a lot about fundamentals.

I want to learn more about investing in quality stocks that pay dividends, as $100K should beable to buy class-A/preferred shares that pay a decent dividend (5-8%). Canadian dividends are also hugely tax advantaged. I think the max tax on a Canadian dividend works out to be ~12%, vs 25% for capital gains, vs 31% for my income tax.

[too_slow]

^ING direct has a 90 day 3% GIC :P