Quote:
Originally Posted by radeonboy
What do you suggest to the average first-time homeowner with limited cashflow, but saved enough for a down payment and a budget that supports their mortgage and everyday expenses with no windfall from their parents in the current market?
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Focus on cashflow, whether positive or negative, but think them as a cashflow. Your mortgage payment is a cashflow. Your rent is a cashflow. Your potential rent from a second suite is a cashflow.
One of the best decision I've ever done was I got an investment property before my house.
The investment provided more than enough cashflow to cover my rent payment. And not just that, with the rent, I was able to re-finance that investment property into cash to finance my other business ventures.
Now, coming back to your case, my suggestion is the follow... we are in a RE downturn. And it's a great time to be a buyer as you hold all the bargaining chips.
Now, what I'm proposing is going to suck in the short term, not gonna lie, but in the long term, it would make a lot of sense.
Check in the city that you are in to see if there's any multi-family residential buildings for sale. Or maybe one of those old timers where it's legal non-comforming houses where a house split into multiple units.
I'll give an example here, not saying that this is what you should buy, but to illustrate what I'm referring:
https://www.zealty.ca/mls-R3045949/2...-Vancouver-BC/
This is a 3.3M "house" in Vancouver west side. Which 3.3M is kinda the norm as far as house goes in the area. But this is split into 4 units.
Assuming you were looking for a house in this price range in the area, why not do something like this? 4-2br units. You live in one, while renting out the remainder. At the rent that west side is asking, the 3 remaining units can easily bring in 8-9k a month in rental income. Thus, you actual out cashflow is only 3-4k assuming normal interest rate and downpayment and if taking the amount of principal paid, the actual cashflow paid is near 0.
You could structure it into a business, where you get to write off expenses such as maintenance, property taxes... etc.
Or if you want to tap into the CRE sector, something like this
https://www.zealty.ca/mls-C8073314/3...-Vancouver-BC/
You've got residential units above with commercial units below. The good thing about CRE vs. RE is that everything is in the contract. So there's no RTB rules to care about and it's a lot more straightforward.
The idea is the same as prior example. Where you live in one of the units and renting out the rest.
Yes, life quality going to suck, but the idea is this... once you paid it off, not only you've got 4 walls and the roof above your head, but something that would continuously generate income for you.
When we compare a house vs. a unit like these 2, after 25yrs of mortgage, what you end up with are vastly different. A house is a house... it's your shelter and you might rent it out somehow, but the income is nowhere near the split units case. By then, assuming a relatively conservative 4-5% cap, a 3m unit would yield roughly 120-150k and I'd be very impressed if you can find a 3m house that rents for 10k a month.
If you are just starting to get into the RE market and don't need to care so much yet about life quality, this is something that I'd personally look into. Because the idea is not to stay in these units forever. But rather, once your income stabilizes or debt level has come down, you can use the income of these units to either rent a much nicer house or just pay the mortgage on another.