Discussions

The rich get richer and the poor get poorer.

Lot rent is $240ish/month, no property tax and my road is cleared far quicker than most city streets. My mortgage is low, because I bought a cheap very large mobile ($600ish with lot rent) and I will save the money and put into buying a bigger house when my youngest goes from elementary to high school. Yes some lot rents I looked at are upwards of $400, but they are big, and a lot newer mobile home. I also know of rentals around $1000 - $1600 for an entire house in the city. just comes down to looking, being in the right place at the right time and setting your priorities. But it's easier to complain about prices and blame it on the greedy landlords....like the 100's of other posts about this same topic!

I’m curious where you got your stat about most of the landlords expenses being paid off in the first four years? Even some simple math will tell you that at $1100/month rent, a landlord would bring in $13,200 of revenue that year. So in four years, that would generate $52,800. Let’s say the rental costed them $200,000 to buy....where does the $150K difference come from during that first 4 years? I also think you should do some research about how much of the mortgage principal gets paid off in a year vs how much goes towards interest - it would be more like $4,000 of the mortgage principal getting paid off each year at the beginning... so without even factoring in property taxes, etc - I really fail to see how the research has shown that the expenses are paid off in the first four years. So please enlighten us all with where you got that information from.

Our mortgage on our rental property is $1000 a month. Land taxes $300 a month. House insurance $110 a month. Tenant currently moving out- I have about $2000 to fix (walls, paint, etc). Plus because it’s for sale now, we won’t be filling the vacancy. So we are going into a deficit. You need to have set away for repairs. We had to buy a new stove already, change a window, call plumber multiple time’s (always on weekends too). It’s not a get rich quick scheme.

There are several houses for sale in Brandon right now for $100,000 or less. Principal interest and taxes would be $500 or less. These houses are older and small but liveable. If it's just about the money there is a solution. Or you could rent it out and have it paid off in four years.  
There are also 56 one bedroom apts. for rent right now on E-Brandon. 53 of them are under $1000 a month all the way down to under $500 a month.  
 
Edited by Old Lady, 2020-02-06 08:57:05

I do not wish to detract from your statement that housing is quite expensive as far as rent goes. However, can you cite any source that has the average 1 bedroom apartment averages about $1100.00.  
 
Please do not weaken a reasonable argument with exaggerated stats.

When tenants tell me what to do, my eyes start to glaze over. There's a reason why the numbers don't work in that formula... Your expectations are set way too high. I can say the exact same thing if I apply these numbers to the payments of a new vehicle. Min. wage won't cover the payments of a new car, either. Well, guess what? The cold hard facts are that if your annual income is under $50,000... Many of your dreams & anticipations of living like your parents or like people on social media, have to be reined in a little and brought down to a more suitable reality. Sorry folks, you're looking at the wrong apartments. Plain and simple. If you're earning less than double min. wage... You're poor. That's the reality. So, stop looking at or shopping for stuff you can't afford. The phone you want? ...Not happening, It's going to be a simple, last year model on a pay as you go, limited data plan. Your vehicle will probably be consisting of one of the three... pedal power, public transit or ten year (plus) piece of junk by today's standards. *gasp* NO BLUETOOTH !!!??? ....And believe it or not... Your living accommodations are not what or where you want.  
 
The public is at fault, not the landlord. If the general public gets the idea that they all should deserve to start off living the same lifestyle as living with mom and dad? ...That's not happening unless you make more than mom and dad. It takes sometimes up to twenty years to get to the level that they are at. So, get your head out of the clouds and ask them what their first place was like. You'll be quickly educated on the terms like "sacrificed", "made do", "earned" and "saved up". You want it all and some of us landlords will provide those services. But then you sit there with a frumpy face and speak with a sarcastic sneer, "This is all I'm getting for that price?" Then you go to the internet and complain that we are either crooks or slumlords. What the hell! You want new and modern, but don't feel you should be paying for it. Sorry, can't help you. Those dark floors, shiny fixtures, new appliances, and sleek cabinets don't make it past the ten year mark anymore. They're basically one step up from being defined as disposable, single use and cardboard. And for whatever reasons, tenants are extremely hard on everything (Maybe it's because they know it's not theirs and the don't care? Just saying) So, with the combination of rough living habits, poor grade materials and fussy faces... Someone will be paying for it. Want to guess who? If you didn't say everyone, you better stay living at mom and dad's a little longer until you grow up.  
 
Just my opinion, I could be wrong.

Years ago people that had money, and wanted to invest in real estate as an alternative to stocks/bonds or to diversify, bought properties, counting on the fact that they would increase in value. They took cash and bought properties(not loans) and rented them out over time. The rent collected would cover taxes and upkeep and maybe make a few dollars if they were lucky.  
 
This has changed, now you have everyone taking out a mortgage and expecting the rental income to cover the mortgage, taxes, upkeep and profits. and then 20 years down the road have a free property on the backs of the people that can't qualify for a mortgage.  
 
Ask yourself why you can now buy a house for a lower payment than renting the reverse of what it used to be.  
 
Edited by jonnie_66, 2020-02-06 10:28:02

Well said Snowman +1

Well said snowman

I think I understand what you're saying... that previously the mortgage payment didn't factor into the rent prices but now they do, artificially inflating the rents?  
 
That might be true. I didn't know any landlords 20 years ago, although I know quite a few now and mortgages are the norm. But I'm not sure it's correct to somehow blame the landlords for market conditions that facilitated this situation.  
 
I think landlords need to price their rentals a bit higher than they would need to otherwise because of rent controls - their ability to increase rent to cover their rising costs is strictly limited in many places including Manitoba. In a free-market rent situation, you potentially could have landlords using much narrower margins knowing that they can raise the rent as required down the road. However, that's also fraught with other issues, so some places (like here) tightly control rents as a result.  
 
I think it's also an illusion for renters that somehow home ownership is cheaper than rent - it's not. In addition to coughing up considerable resources for the down payment (much more than you do for renting), you need may more cash flow in ownership than in renting. Anything that breaks in your responsibility, you need to do upgrades like windows, replace roofs, etc. You also need considerably more insurance than a tenant needs. Every few years, you need to refinance.  
 
So yeah, your rent might be the same or maybe slightly more than my mortgage, taxes, insurance, but when was the last time you had to shell out to replace a hot water tank? An appliance? A broken door? Money needs to be set aside for that over and above the basic expenses, even if you do zero property upgrades (or even maintnence so it doesn't degrade, like paint).  
 
Really, the only advantage to owning vs. renting from a financial standpoint is that you can leverage your property for borrowing purposes.

Your numbers seem extremely off, I was in a top floor of a house 2 bed 1 bath for 1200 a month including water and hydro. I then moved to an entire house for 1100 a month plus hydro. After living there for three years I took advantage of houses selling extremely cheap right now, bought myself a 3 bed 2 bath home. Needed some work, but it’s all been done now and we have a lovely home for a mortgage of $590 a month. I worked two jobs to purchase my home. I don’t think rent is as bad as you think it is. I was able to pay rent on an entire home and still afford to save for a down payment. Problem is the more money people make the more they spend, no one needs $800 car payments a month. No one needs the newest iphone. *shrugs*

Also just to add, a one bedroom bachelor suite with ALL UTILITIES including wifi has just been posted for $600 a month. The add below that is a two bedroom apartment for $1000 a month.

that the OP's referenced link is an American site. There are a number of differences between Canadian and American economics (tax rates on mortgage interest payments, income deductions, etc.). Might be useful to center this discussion on information relevant to Brandon.

I know that in 2001 I could have bought a house on Princess east for $46,000. It was built in the 70's, 1000sq/ft nice deck, nice siding, 2 bedroom 1 bath with a finished basement. That same house was over $120,000 by 2009 and today it's over $200,000. When we bought our house in Brookwood it was 5 years old and we were the 5th owners. We tried selling in 2013 and got nothing, no offers. The real estate agent told us that what started in the early 2000's with that same $46,000 selling for $65,000 and the owner upgrading, and selling that house and upgrading on and on had finally worked through the markets and now houses were where they were likely going to settle around the prices you see today.  
 
The guys who bought rentals in the 80's, 90's benefit from the inflation renting houses with essentially no mortgage for $1200/month because all of the new housing NEEDS $1200/month just to cover costs..so they get market prices. Good for them, their gamble paid off...if you stop renting for $1200 they won't charge $1200, but they also won't buy the houses to rent at all because that's what they cost because the city of Brandon has decided citizens could choke down drastically higher property taxes ...because property taxes also spiked mid 2000's to pay for a lot of services which we may or may not get value for but regardless need to pay for. You also can't blame the real estate agents because no one was complaining when they were flipping houses for unreal profits all through that boom..but it's over now.  
 
Then you get the poor guys who own apartment complexes and are shackled by our provincially mandated rent controls...those are the only guys renting for $500/$600 month and they're also the reason the economic development can technically say that average rents are $600/month (but good luck ever getting into one of those places...no ones giving up their place in Scotia towers or rosser gardens). Kind of like "average salaries" in Canada are $52,600/person even though few of can say most of our friends easily make that much...  
 
I'm terrified of ever losing my house because you're damned if you didn't buy a place before 2013 and you're damned if you can't afford one and have to rent...neither is cheaper or more expensive than the other. It's just what you're stuck with.  
 
Edited by Heynow, 2020-02-06 12:55:20

I'm just curious where you're getting your interest free mortgages, free insurance, free property taxes and $72,000 houses (based on a rent of $1500/mo ...) And tenants that don't do damage?  
 
I want in.

Return on investment  
 
A comment above suggests that rents are higher than they used to be because landlords today are buying on credit and incurring mortgage costs. That’s only a little right.  
 
Pretend that you are now ‘mature’. By scrimping and saving and sacrificing and living modestly over the past 30 years you’ve managed to accumulate a ‘nest egg’ of an extra $500,000. Liquid cash (mostly), all after taxes, and yours to use.  
 
There are many, many like that in Brandon today.  
 
You decide (against your financial advisor’s advice) to invest your hard earned savings in rental property and you buy a duplex listed for $500,000. By the time lawyers’ fees, land transfer taxes, appraisal, inspection, etc, etc. are accounted for your bill is $520,000.  
 
You charge $1000 per month rent each unit. Your gross income is $24,000 annual. You pay $5000 annual for propery tax: You pay $2000 annual for insurance. You allow $5000 annual for maintenance and repair, because over the long term high expense items like shingles wear out, furnaces get cracks in the heat exchanger, plumbing fails ... . Your net income before taxes is $12,000. And presuming you paid cash mortgage costs are extra as the comment above suggests.  
 
But - if you’d followed you financial advisor’s advice you might have invested that $500,000 in a term deposit guaranteed at 3%, no risk, earning $15,000 a year, before taxes. And you don’t have to deal with renters – no late night phone calls about the toilet, the heat – no worry about drug dealing – no complaints about loud parties. And so on and so on. How much is your time worth?  
 
How would you maximise your investment portfolio?  
 
It’s all about return on investment.

I'm not sure if you're referring to me but your numbers are way off but I guess anyone can make bad choices. The scenario could look more like this: take $180k buy a bungalow do renovations to the tune of $20k over a few years. Rent out the upstairs for $1300 + half utilities while you live in the suite downstairs. Mortgage is only $900/month. Have enough money to live rent free and keep house in proper repair and then get free house worth $300k+ with increased value by the time the mortgage is paid off.  
 
$300,000.00+ for free  
 
To take it one step further buy another house every 5 years, rinse and repeat the process.

The presumptions are:  
 
That you can get $1300 a month rent out of a $180,000 investment:  
 
That you like living in a basement: you apparently don't have wife and children.  
 
Wasn't referring to you specifically, but:  
 
Good on you if you make that formula work. I know a few who have tried and failed. And one or two who are now very well off.  
 
You are right - if you can build equity in a property from lease payments then you can come out ahead in the long run. Even the medium run.  
 
Risk vs Reward. Go for it.

You are exactly what is wrong with the rent problems in this country. Not you specifically but what landlords have become in general and including you.  
 
Had you paid 100% cash for your rental(an investment, not a borrowed risk) and taken the rental income for repairs/upkeep/taxes you would have money left over for actual income and after 20 years the house itself could be sold for a significant increase in value. You probably would have made out pretty damn good. You know, an investment. This kind of nonsense investing that developed over the last 40 years is a gamble and everyone loses. You drive housing up, you drive rent up and any borrowing for investing is gambling, but everyone wants to get rich quick.  
 
You(and many others) want to be a landlord to someone that can't afford a mortgage by taking out a mortgage and increasing the amount higher for that same person that couldn't afford the mortgage.  
 
Yes greed is what's causing the high rents in Canada!

If you've read any of my posts you'd know that I think borrowing to become a landlord is not only stupid but partly whats wrong with the rental situation in Canada. But I do know people who do well, but most don't borrower, and some just renovate their primary residence for extra income.  
 
The way I described investing $200k(with renos) is easily doable and you can absolutely generate $1300/month out of it while living in half of it. I personally know someone that is doing this now(I do his taxes). There is extremely low risk as he owned the house anyway. The basement suite he lives in is nicer than 90% of the apartments I've seen in this town and he is married with kids and grandchildren.  
 
From a $500k investment in a multi unit situation I would expect to get between $3000 and $5000 month or you're doing it wrong.

1300 rent less your 900 mortgage leaves you 400. You also have to claim and pay taxes on that 1300 at income tax. And your house insurance will be at least 1.5 times what it is now. You aren't leaving yourself much to cover repairs with.  
 
On the other hand, where are you finding this house for 180 grand? That's an awesome price considering the suite you rent out will need to be at least 3 bedrooms to get 1300 month. I assumed that the basement is already finished because it'll be hard to split the house into suites and put in a 2nd kitchen for 20 grand. I think budget wise, its more likely you'll be spending 225 to 250 grand on the house without the renovations.

I have been looking..... They are rooms for rent. $600 starter

I had a very successful job while I was living in a very small basment apartment that was about not even 600 as. Feet. My bedroom only fit a twin. So I know don't expect to have all the fancy gadgets.  
 
But my landlord basically drove me out of my home by being a bad landlord. When I first moved in it was filthy, looks like there were mirrors torn off the walls, and gravel.. yes gravel in my tub. My stove didn't work and he said it wasn't his problem. I had to go out and buy a foster oven just so I could cook. My windows didn't lock and my outside doors were paper thin and could be opened with a credit card. I had to wear shower shoes in my tub when I showered as it wouldn't drain and it took him 3 months to in clogg the drain. And the fridge was fixed up with culking, I had to get a mini fridge to keep all my milk and cheese as they would go sour within a day in the big one. When the big one finally died and all my food was spoiled I told my land lord and he just cursed at me and said what and I supposed to do about it.  
 
My dad had purchased a apartment in killarney and replaced the stoves and gave one to me as he knew I needed on as my landlord still didn't have one for me after 4 months.  
 
There were a lot more things that happened, coming into my place with out notice. Leaving the walls open with insulation exposed (I had a cat) , not advising my that we were being evacuating....  
 
So we left after the flood and the place was in immaculate shape. Much better than when I first moved in.

you're basing your 1 extremely bad experience with 1 extremely bad landlord and painting everyone in Brandon in the same light? By this method of thinking, as a landlord (which I am no longer) I could base my opinion on you and say that all tenants are crazy enough to move into a disgusting mess and put up with a suite that is a wreck and leave gravel in my bathtub and charge for it! I'm sorry, but I question your decision to move into this place if it was this bad! Not to mention, if you have a pet....especially a cat, you can't very well expect to have a high end suite rent! Read all the past topics about how hard it is to rent with a pet, and you will see that most place don't want them and if they do allow them they will be more costly. I know someone with like 3 dogs and rents an entire house for just over the $1000.00, so obviously you didn't look around or were like so many and were way too picky about area. But in saying you were way too picky, I still don't know why anyone would be crazy enough to move into this disgusting place, if it was as bad as you say it was. Like everything else, if it sounds too good to be true, it probably is....and this story you're telling sounded too "good" to be true and I think you're leaving out a massive portion of the story.

"1300 less 900 mortgage leaves $400 You also have to pay income tax on the $1300"  
 
You only pay income tax on the $400 the 900 is an expense.

But my units are all held in a holding company and my goal is to buy a unit with $50,000 down and have the tenants pay off the mortgages so that went I retire in 25 years I'll have the appreciated value of the assets, the mortgage free rents to collect, and if all goes to plan a couple units for my kids while they find their footing.  
 
I agree with you otherwise...you can't put 30% down and expect to make mortgage payments, upkeep, taxes and cover vacancies.  
 
It does seem like everyone I know has a rental somewhere...makes me wonder if thats part of what drives up the prices of a lot of these condo's, etc.

You can only claim the interest on the mortgage, not the principal.