Hey Guys,

My Friend and I are thinking to buy investment home in Ottawa.

It is townhome about 1500 sq ft for 265K (3 bedroom, single garage, 2.5 bathroom.) Brand new home. Builder's promotion price for quick occupancy. Average price of this home is 300K in surrounding area). Closing date would be summer 2016. Rent in that area is about $1400.

Already have another similar rental property from last 4 years in surrounding area and getting rent $1550 as of today.

I have noticed market is down and no good prediction for 2016 and 2017 and mostly people will not suggest to buy rental property.

I have few points to tell you and then I am looking for your views and suggestions.

1) We are thinking in Ottawa (Not in Toronto or Vancouver where prices are too high). So, not expecting much correction. Correct me if I am wrong.

2) 50% partnership. Not taking risk 100%.

3) We are investing for long term (say at least 8 to 10 years). May be longer than that.

4) Mortgage rate is low. Expecting positive cash flow and no maintenance for few years. Same as past experience in surrounding area.

5) As long as we have good tenant, I don't think so we need to worry about how much price goes up and down at this point. Even if market is down, these two years will help us to pay out part of mortgage.

6) I believe taking an action is more important than keep thinking and not doing anything. May be these two years no growth in price but still mortgage will go down. Plan is for long term.

7) There is a risk of bad tenant but it always there on this route.

What do you think?

It will be great if you can share your views/suggestions/comments...
I want to ensure that I am not missing something to consider before investing...

Thanks in Advance

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Success is Never Ending and Failure is Never Final.

I think we have many members with lot of knowledge and experience in Real Estate Market.
Any comments/suggestions will be appreciated.

Thanks,

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Success is Never Ending and Failure is Never Final.

So you have stated all positives...so why would you think not to buy ?
What is stopping you or are your concerns that you want others to address ?

Apparently he wants to validate that what all he is thinking as right is right and that he may not be overlooking some thing.

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Fido.

My all positive points may not be correct. It is my personal view. I may have missed some negative points to consider.

I would like to consider view/suggestions/comments from other senior/experience people before making decision.

Thanks

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Success is Never Ending and Failure is Never Final.

Townhome will not escalate in price over a period of time, not much. Similar investment should be made in detached or back split or even a bunglow style (old will do) with possibility of more than one basement apartment. Some of these houses will have potential of 3000 rent a cashflow of almost 1000 per month. plus you will have an average 5-8%( depending on location) escalation on any freehold property.

Since you are buying a newly built house, I am assuming it is outskirts of the city. Rent will be lesser. There will be initial charges such as appliances, driveway, backyard fencing on new house etc. For that reason the prices of older houses around is 300k.
Also I suggest you should get your mortgage lined up giving details about your previous mortgages. For 2nd investment property (being overall 3rd) you might have to shell out 20-30% down payment. Sometimes such things do cause hassles in those 5 days of waiver period. Though You being on 50% partnership , down payment should be affordable.

I 'll avoid condo and even townhome as investment property for the reason that similar kind of investment or little more in a freehold property can give you richer dividends. Not to forget the condo/townhome fees increae over a period of time.

Thanks San-Hugo.

Few more points I would like to add...

1) Townhome I am talking about is freehold property. No monthly fees and New modern style..
2) This townhome is row house. Not possible for separate basement apartment to rent out to another tenant. I don?t see that kind of concept here in Ottawa.
3) I prefer to not go for more than $275K for rental property. It cost more in mortgage/property tax and all other expenses but not much higher rent. I feel it is tough to find single family tenant for more than $1600 rent. I do not prefer to rent out separate room to students or individuals. I would be happy to know your views to consider.
4) Agree price will not increase much but expecting to get similar resale value of neighbourhood after fence and AC. All other upgrades will be part of purchase. There is 15000 design center bonus & 3 appliances with the deal. I am going to use DC bonus for granite counter top and other stuff.
5) Talking about Ottawa. Yes it is not in middle of city but not far. Downtown is 20 minutes? drive in regular traffic. 10 minutes? drive to most developed surrounding area. Actually it is in middle of all newly developed surrounding areas. This new community built close to 25 years old community. Both community are together now. May be hard to imagine for you guys but just mentioned what I have noticed.

I am open for your ideas/suggestions to invest somewhere else than real estate. I don?t have much knowledge on stock market. So, I stay away. I believe I may earn on some trades and loose on some trades but hard to take out as income after all trades (Applies to me and it is my personal view and I may be wrong). Though I invest in mutual funds for long term. I feel hard to make money out of money. Any idea/suggestion will be appreciated?

Thanks.

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Success is Never Ending and Failure is Never Final.