Motivation to become a Landlord: Part 1 of 4

Last week I promised to reflect on my experiences as a landlord.  Here’s the first of a 4 part series on my journey thus far.

If I were you, I might be scratching my head a little bit. I mean here’s a single mom, living in Toronto, struggling to get out and stay out of debt, and she’s telling us she has a rental property? Is this chick for real?

Well, yes, that’s the broad strokes.

Truth is, I’ve always wanted to have a rental property. I think I’m a closet house addict. If I had the money, I would have been in the house-flipping business a few years ago. My ex-husband (who was my husband at the time) was always risk averse. Any thought I ever had about something that even smelled of risk, he gave it the veto.  I’m still remembering the conversation we had about 1990 about how badly I wanted us to invest in Apple stocks, but I digress.

Fast forward to late 2004. My husband and I parted ways. It was as amicable as these things can be, but when the lawyers started their war of words, things got a bit nasty. By 2005 I thought my future would be a fiscal disaster. In the latter years of marriage, I earned more than my husband, and there was a threat that he was going after my future pension earnings, even though we had previously agreed to leave them alone. (I worked for  government at that time, I don’t any longer). Things got bad enough that I thought that I’d have nothing for the future. I surrendered a whack of my RRSPs in order to “equalize” his savings and mine. I went into hyper self-protect mode. How would I secure my future?

For some strange reason, my mind turned again to real estate. I spoke with a neighbor who was about to quit his 9-5 job because he made enough income with rental properties to hang up his hat in his late 30s. I spoke with a couple of realtors. My gut kept telling me buying a second property was the right direction.

What money did I have for this? Absolutely none. What I did have was equity in the little home I had purchased with the proceeds from the sale of our ‘marital’ home. I also had a manageable existing mortgage, drug coverage, and no major health diagnosis in our household at that time. I started looking around in the town I lived at the time, which was Barrie, ON.

I realized very quickly that I didn’t want to be the kind of landlord my former neighbor was. He was only interested in doubling his expenses every month. His properties weren’t exactly the slumlord type, but they weren’t the kind of property I’d want to live in myself. I couldn’t rent a property that I wouldn’t live in myself. That’s just my hard-wiring. Besides, my motivation was my future earnings, not my immediate, day to day needs.

A realtor helped me research the rental rates for two or three bedroom homes in the area. With that information in mind, I did the math to help me determine what size of mortgage I could manage, and leave room for municipal taxes, insurance, repairs, risk, etc.

After looking at four or five properties, I found the one that was the right fit. It was almost the right price, had all the appliances included (a rarity for Barrie), was in reasonably good structural shape and was in a growing area of town. After the usual negotiation, my final offer of $169,000  sealed the deal.

When you’re buying a property to rent, the minimum down payment you’re required to put down is not the same as if you were buying your principle residence. If you’re motivated to be a landlord, you should check in your jurisdiction what that percentage is.

The down payment and closing costs came from the equity in my other home.

In my case,  I was (and remain) willing to accept no short-term gain from this property. My goal was to get another toe in the real estate market, and then have somebody else pay the mortgage for me for about 20 years. Then, when I’m retired, I’ll throw a few more bucks into it and make it vogue, sell it, and pay the lower capital gains tax on it.

I was (and remain) committed to even putting a bit of money into it on an annual basis, because it’s a cog in my retirement tool-kit. In the past, I’ve invested thousands per year into mutual funds or whatever the advisor-of-the-day suggested was the right thing to do. Often times, that money disappeared into the abyss. This, to me, was no riskier, in fact, I have an increased comfort level with it because I think I understand houses and I think I understand property value.

Five years later, the $169,000 townhouse is valued at $200,000.  My initial investment was $11,000.00. With the exception of this month, somebody else has paid the mortgage, taxes and insurance for that entire period. In that time, a GO train station was built less than 3 km away from my property linking Barrie residents to Toronto and back, six times daily. I’ve been very lucky.

In the end, the ex-husband didn’t go after my pension, and we arrived back at where we started – to leave each other alone in that regard. I’m thankful now to have a good relationship with the ex.

Now, I’m renewing the mortgage on the property, with a 15 year amortization. Five years done, fifteen to go. Friends have asked me if I want to sell it now, and I won’t. If it sells for $200,000, then I pay a realtor their fees, the closing costs go to a lawyer and then capital gains go to Revenue Canada. I wouldn’t gain anything. I’ll hold onto it, and keep it in good repair, and a desirable property to rent. When the mortgage is due again in 15 years, I’ll reassess where things are at then.

Tomorrow: Finding tenants and trusting your gut.


3 responses to this post.

  1. Good for you for taking the plunge when you knew it was the right thing for you to do! I’m a tad more risk-averse so I doubt I’d ever explore the landlord/tenant world myself, but I can totally see how it can and will make you money down the road. I like your attitude about not wanting to rent out a place you yourself wouldn’t be willing to live in. That speaks volumes for your integrity. Looking forward to the next installment of your 4 part series.


  2. A couple of things, in general making money in real estate is the way to go. However, my concern is has the train (money) left already? The growth of real estate because of the cheap money has to come to and end. Does it make sense to take some profit wait for a pull back (which may last for years)?
    Property values are increasing at a much higher pace than people’s wages. My gut says no. I have a number of clients in the commercial real estate in the Toronto area and rent is getting cheaper by the month. Also one of my clients sells steel door for condo’s ware houses etc. In the state of Florida he says there is about a 8 year supply of condos!! This means low prices for years!! A poor market in the US generally works its way here. T

    I don’t know how old you are, but I was living in Vancouver in the the early 80’s and in 18 months real estate was down by almost 50%. Banks are funny since there is no equity rates…banks gave high posted rates.

    The one area I like is the retirement market for seniors (in their final years) in Ontario and many other places there is a shortage. It takes bigger bucks, but the pay off is big. Again, a few of my clients is this area, are making a ton of money! I think by 2020 there will be more people over 65, than kids between 0 to 14 years old!

    From a tax point, paying off a tax deductible mortgage does not make sense over the 15 years vs 25 years. Also having a negative cash flow from the rental property.

    As far as going through a real estate agent to sell… you don’t need one.




    • Hi Brian,
      Thanks for coming by and sharing your thoughts. I agree that the fast money train seems to have left the station. Remember when there were a ton of people involved in flipping properties? The re-runs are still on TV 🙂

      I think your observation on a retirement rental for seniors is astute. My parents were wondering whether or not to give up their home a few months ago, and ended up putting in some major renovations in order to meet all of their needs into their 70s and 80s.

      Oh, I’m 46 by the way! I’ll look forward to your feedback on my fourth installment of the series, where I disclose the financial tidbits.


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