All Forum Posts by: Andrew Gingerich

One other thought. Let's assume she's got 30K to invest. She drops the 30K into a mutual fund made up of a basket of stocks and gets 7% compounding interest for 30 years. At 90 she'd have 243K. Not bad. But of course it's not that good because she had to pay taxes on gains each year. So actual returns are likely 6% or so.

Now let's assume she take's 30K and puts 25% down on 120K house or condo. The house appreciates 4.1% (less than stocks) over 30 years. At 90 she now has a 409K asset.  Wow. And she's not had to pay taxes on it. (Aside from property and income taxes- which the tenant paid for and her expenses/depreciation paid for).  And it's been cashflowing every month so real returns are likely 10%. 

That might friend is the value of leverage. She bought a 120K asset today for 30K. 

Of course the mutual fund/stocks is great if you like to sit back and watch your money grow slowly and somewhat modestly. But if she wants a better return the real estate and a bit of leverage is the way to go. Just be prepared for a bit of work along the way.

All the best!

If your mom is 60 and lives until she's 90 she's got a 30 period to let a tenant pay of a 30 year note on her behalf, plus she can cash flow that property and pay it off early, or use the cashflow for thing in retirement. If done right she could leave one or several paid off assets to her heirs tax free. Plus, get a lot bennies from those assets while they are living. 

Having said that real estate is considered to be more hands on and more risky than conventional mutual fund investing, but with that risk and hands on comes the potential for greater yields. The proof is in buying right of course. Like most REI say... you make your money when you buy.

As long as your relatives are okay with the risk and willing to be hands on than they should go for it. 

Given her location she/they could also consider vacation rentals. I know there are a lot of folks in Washington State who like to vacation in their neck of the woods...especially in January and February. I think of the Phoenix and Las Vegas area as the Florida for the Pacific Northwest. 

@Kate H. weird. A Gee Gee is the mascot for the Ottawa U. Carleton and Ottawa had a bit of a rivalry when I was attending and one of the chants toward Ottawa U was making fun of the Gee Gee (which I have since learned is the first horse out of the gates in a horse race). 

Like @Chris Habets says, they're all fickle you just have to keep trying until they insure it. My quotes and the way these guys like to insure the same unit is all over the map.  

Wayne, we have a couple of condos in WA state. They have been good investments for us but they are a bit dangerous in terms of condo assessments. @Joshua Dorkin covers a lot of this in early podcasts, specifically his California condo frustration back in the day. He'll be the first to point out that it is difficult to control the board and many people find themselves running for board positions to maintain their assets. One example Josh pointed to: his association refused to buy earthquake insurance in Cali. Duh...

In my opinion condos have some advantages that single family's don't. Our condo dues for example keep the board paying attention to us and our tenants when we aren't around. Of course it's nice knowing that the exterior of your unit, the yard, pool etc. is maintained. When we go to sell we can be confident that we don't have to do a bunch of curb appeal work. 

Condo's likely are harder to sell in most markets compared to single families. But the entry cost might be less than say a SF. 

In the end lots of pros and cons with condos. Again, we're pleased with the performance of ours. For us, it's all about the numbers. For example, we can by a SF for 125000 and rent it for 900 or we can by a condo for 90K and rent it for the same amount (900). Also, our maintenance is less because much of it is covered in our condo dues. Finally, condos are often very tax and insurance efficient relative to single families. Both are at least 1/2 the cost of what a SF would cost us. As a whole, you simple have to do the math and analysis to decide whether the assessment risk is worth it. 

Best of luck 

Andrew

Always nice to have an electrician around! Seems like everyone in the valley is busy these days. Which is great news for the valley.

@Jay Hinrichs your dad would have done well to buy here in the 30s and hand you the keys. But clearly you've done exceptionally well without the help. Watch out for the flying cherries and apples in this war zone. :) Full disclosure, we have it good here. 

P.s. you can look up crime info on Trulia in most neighborhoods. What are the police calls for? Is the neighborhood often in the paper for bad stuff? 

My impression is every location/city is different. And most investors would do well to not confuse C class from war zone. Frankly, some smaller cities and towns don't have war zones. War zones, to me, are places I don't even want to be walking on the streets at noon. While C class on the other hand might be okay to invest in but be prepared for more hands on management of your property, both in terms of attributes and fixes to the home and tenant management. Further, war zones are likely to have high rates of crime, drugs, unemployment, vandalism, theft etc. Whereas, C class may have higher rates of crime relative to other areas of the town or city but that crime is largely non violent and lower felony rates. So if you're considering an OZ ask yourself if it is a C class OZ or a WZ OZ. The former may be acceptable and advantageous and the latter... not worth it in my junior opinion.  

Unfortunately, I don't have a recommendation. But what the heck is a Gee Gee? 

-Warmest regards Carleton Alum.

All kidding aside best of luck. I wish I had a helpful tip here. My impression is that insurance rates are exceptionally high in Ontario. It is puzzling that you're having so much difficulty. Having said that, I have had multiple insurers pause and give me higher rates when buying a home that was built in 1945. But if the electrical has been updated, and the plumbing has been updated, and the roof is newer... than it should be easily insurable. 

@Scott Trench had an interesting blog article on these themes recently. Basically he made the argument that multi-family commercial is maybe a little more vulnerable in a raising interest rate environment than say single families, which are financed on safer term and terms loans. Here's the link to his work/thesis https://www.biggerpockets.com/renewsblog/commercia...

I am not, nor have I had a commercial loan on a multi before so I am not qualified to answer these questions. What I know is that in my local market multi family housing and building permits for multis are flying of the shelf, relative to new construction for entry level single family homes. I think this is partly because the entry for single family is too high for most local shoppers so they need to rent. Also, younger folks can't yet afford to buy a SF. I have to believe that this is cyclical however, and that these apartment dwellers will eventually want to enter the SF market. 

On balance, interest rates going up should make it less affordable for folks to finance, and put downward pressure on home prices. It should also drive up the cost to rent, which, in theory should benefit all landlords. 

While I am not an expert, my thoughts are, be careful in this market not to over leverage, be ready to lower rents by 20% and still be able to service your debt obligations, be ready to see 20% vacancy. Buy property below market value regardless of multi or single family. Get long term loans that allow prepayment, and fix your rate. If you can do all of this you're likely able to keep growing, stay profitable, and ride out the bumps that will come. At least, that's my approach.