Newbie from Toronto

[Florent Gonthier]

Hi,

I'm Florent from Toronto, Ontario.

Newbie at investing in general, I have decided to start looking into it a few months ago and I am now ready to make a move.

I currently work a full time job as an engineer and I would like to start buying properties on the side. I have never done REI before and I don't own my current place, but I have been doing a lot of research and I am excited about it!

A bit of my REI background. As I mentioned, I am new to this. So far, I have been reading and researching a lot. Among my reads, "The Millionaire Real Estate Investor" (from Gary Keller ) was my first book, immediately followed by "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" from Frank Gallinelli. I'll have to confess, I love math, and excel and stuff like that, so reading about all these formula and making my own property analysis spreadsheets was very fun to me. On top of these two books, I have also watched every video avaialable in "A Beginner's Introduction to Real Estate Investing" on the BiggerPockets website and I have listened to a fairly large number of episodes of the BiggerPockets podcast. Thanks a lot for all of that by the way. There are a lot of interesting guests and cool resources on this website, it's an awesome place to learn.

My long term objective here is to generate steady income for when I retire (I'm 31 now). Maybe I can even retire early and go travel the world? With that goal in mind, I would like to start acquiring buy-and-hold properties (one or two every couple years is my objective) until I get there.

I have recently started looking into the markets around me and Toronto does not sound like it's going to be working for me (the market is a bit insane). After looking around a bit, I set my eyes on a few other surrounding cities (one of them is London, ON, 2.5 hours away from Toronto) where prices seem a bit more affordable. I have been visiting a few properties in the area and it sounds like some of them would cashflow enough to get my interest. Something else about my search; my job usually keeps me very busy so I am looking for properties that I can manage from Toronto. At this time of my career, that means townhouses managed as condos (they take care of the roof, snow plow, trash etc..) or using the help of a property management company.

Here is a link to a spreadsheet that I use to see if a property is worth looking into: http://tempsend.com/A5C92113E0/5E1F/CashFlowAnalysis.pdf

I am a total beginner so I would love your comments to improve it. In case you are wondering about the color code, every cell that's light green is a user input, everything else is calculated. I believe the color scale at the bottom is self-explanatory. This a 25 year analysis making the following assumptions:

- The condo corp takes care of everything but the inside of the place (roof, snow plow, trash etc..)

- Vacancy rate is 8.33% (I believe this is conservative for the area)

- Insurance increases up to 3% each year after the first year

- Property tax increases up to 2.8% each year after the first year

- Condo fees increases up to 5% each year after the first year

- Interest rate increase after 5 years and stay steady at 4%

I am not sure if if it is a common practice to look that far in the future, since it forces me to make a lot of assumptions.

All I know is that it's a fun exercise and it gives me an idea of how much of a rent increase I'd need to make this happen (in this example, a yearly 1.3%).

I still have a few unanswered questions that I'd like to hear your take on:

- This specific townhouse I'm looking at is part of a low income area, is it something I should be afraid of? My real estate agent (who seems trustworthy) tells me I would have absolutely no problem finding tenants in this area.

- If I have the option, should I inject more money in the down payment? I like the idea of a smaller mortgage and higher cash flow, but I'm tempted to get a few more properties to spread the risk a little bit as opposed to having one that cashflows very well.

Anyways, I realize that this was a lengthy introduction, sorry about that, I guess I'm just excited about all of this :)

Looking forward to joining the community.

-Florent

[Claude Boiron]

Bonsoir @Florent Gonthier, and welcome to BP! My only immediate comment to your introduction is to think very carefully about how far away you invest (in relation to where you live), if you plan to be a hands-on property manager. I guarantee that there are some weeks when you will have to visit your investment property more than once, and if your time is worth something to you, you will start cursing yourself if your drive alone is five hours, round-trip.

I'm always available to chat via telephone or email.