It is likely that for the uninitiated, these English words are few that speak. This article will focus on houses that were originally built or subsequently rebuilt in order to lease them and, accordingly, in order to generate income.
Such a house can consist of 2 duplex apartments, 3 apartments (triplex), four (fourplex) or more apartments (multiplex). Now you know what these words mean. The cost of such real estate ranges from $ 800,000 to about $ 1,500,000 or more, depending on the number of apartments, as well as depending on the location of the house and the annual income it brings. In downtown Vancouver, for example, such buildings can cost several million dollars or more.
For whom such a property could be interesting? It is worth saying right away that if you have free money and are looking for ways to invest them most profitably, then it is unlikely that investing in such houses will bring you big profits.
When planning to make, for example, 5% of the value of real estate as your own contribution, you can most likely rely on the fact that the resulting annual income will only cover all the necessary expenses for its maintenance, taking into account the payment of the loan and give some annual profit. From this it can be seen that the more you are able to make your own money as your own contribution, “down payment”, the more your income will increase.
So, who is all the same, the person who makes sense to buy this kind of real estate? Such real estate, in my opinion, can be interesting for people who have a free amount of money, and who recently arrived in Canada for permanent residence.
As I wrote in other articles, the situation of businessmen, or just people who managed to come to Canada with a fairly large amount of money, is often not at all easier or sometimes more difficult (for example, mentally) than the situation of people who came here to live with a minimum of money.
Surprised? Do not wonder. The first problem in this case is not to lose, save the money brought in, and make it work as soon as possible.
2. The second problem is of a psychological order. It is difficult for a wealthy person to go to work at the factory as a worker, because there is still not enough English, and accordingly there is no way to get a higher paid job.
Investing in downpayment from $ 250,000 to, for example, $ 500,000 in the purchase of such a house, can bring from $ 90,000 to $ 150,000 of annual income, and from $ 50,000 to $ 150,000 of net income (excluding all expenses, excluding loan payments). If you decide to pay the full amount of the cost of the house, and therefore do not have to pay a bank loan, then as you can see, the income from such a house already corresponds to the annual salary of the average working Canadian. Buying such a home-business allows a person who has just arrived to live in Canada to look around for several years, decide what to do next, and at the same time begin to immediately receive income from the money brought with them. Even if you are not able to invest a sufficiently large amount of money to buy such a business, then in this case such a purchase may be interesting for you.
Suppose you buy a house consisting of 3 or 4 apartments, in which you occupy one of the apartments yourself. Living in your own home will allow you to live, in fact, for free, and it is also possible to make a profit from the remaining 2, 3 rented apartments. Such monthly profits can cover, for example, part of your family expenses. Not bad at all, especially if you are already employed yourself.
Who else would be interested in buying such a property? Buying such a property can be an attractive idea, not only as a momentary income generation, but also as a long-term prospect. Having been engaged in such a business for 10-15 or even 25 years, you have enough time to pay all the bank loans taken from the bank to purchase this property. If you are able to ensure your standard of living at the expense of your own salary, without withdrawing the money brought by your business, then you can make all the profits to pay off a bank loan. This, in turn, will allow you to pay it several times faster, and in the future to extract net income from this business.
Imagine that when you retire, you own a couple of the houses you paid in which 6-8 apartments bring you a steady monthly income. It is likely that in this case you do not have to worry about the size of your pension and think about how to live on this pension.
To complete the picture, it is worth saying that such a business, as well as any other, has its own difficulties.
1. You will have to deal with the serious selection of those people to whom you plan to rent housing.
The subject of your main interest will be the ability of these people to regularly pay a monthly accommodation fee. Obviously, the financial insolvency of tenants to make a rent can lead to loss of your income, and sometimes even to the fact that you have to bear these costs instead.
2. It is quite difficult to find people who will be careful about their housing during their stay,
as for them this housing is temporary.
3. If the tenant has moved out and the new tenant has not yet moved in, the vacated apartment does not bring you income for this period.
4. After the congress of the previous tenant, you will have to redecorate the apartment in order to hand it over in its pure form to the new tenant, and accordingly you will have to bear the costs.
In connection with the above, your personal residence in such a house is more justified, which gives you the opportunity to have more control over the daily situation.
There are certain recommendations that help the selection of tenants who are able to constantly and timely make monthly rental payments. In Canada, there has long been a practice of the so-called “credit check” and “job letter”. “Credit check“ – checking the credit history for solvency and habits for timely payment of credit expenses. “Job letter“ – a letter from work indicating that the future tenant is constantly employed, indicating the amount of annual income and the length of stay at this place of work. Sometimes, when a person who has arrived in the country is not able to provide a full set of such documents, the owner of the building agrees to rent the property, provided that the future guest agrees to pay for the accommodation immediately for six months or even a year in advance. There is also the practice of attracting a third party to sign a lease as a guarantor, and so on.
As you now see, with the right approach to running such a business, the risk of losses may not be so great.
In my opinion, buying such a property may turn out to be some alternative for the state RRSP program, which you probably all know about. The state program RRSP, a fairly good pension plan for citizens, which has become quite popular, mainly due to the fact that it allows you to reduce your annual taxable income base. Nevertheless, this program, in my opinion, has its drawbacks.
Your money is frozen, or rather, it is at the disposal of the state for many long years. The second one. When you retire and set aside, for example, $ 500,000 dollars in previous years at the RRSP, you are entitled to withdraw a limited portion of your accumulated money each year. If you plan to withdraw the entire amount of the money accumulated by you, then you will accordingly have to pay taxes on the entire amount of the savings.
Investing in real estate, which is described in this article, differs significantly from investing in the RRSP program. You, as in the RRSP program, create your future capital, which, nevertheless, is constantly at your disposal, and also, if you wish, can bring you constant income in the current time. If in the case of the RRSP program, when retiring, you can annually take out some limited part of the money from your own savings, while reducing the amount of your capital, then in the case of buying this kind of real estate, you will receive income from your real estate, while the amount of your capital is not only not decreasing, but is likely to grow over time.
You will probably also agree that the interest of people in renting housing will always remain, and especially in Canada, where the government is consistently pursuing a policy of attracting new immigrants from other countries. I can only add that by investing money in commercial real estate and extracting income from it, you can also defer part of these income annually to the RRSP pension program.