What to do in my situation?

12 Replies

Hi there,

I live in Vancouver Canada and am trying to figure out whether I should be investing in real estate. I currently have around 95,000 USD in cash savings, earning 2-3% in a HISA. I am 23, and am going back to school for a second degree in computer science. I previously completed a business degree. All the money I've saved has come from my side business, which I am currently running as well but the income is inconsistent. I have 0 credit card + student debt, and live with my parents. My cost of living is exceptionally low at this point; my tuition is covered by grants and I'd like to think myself as fairly fiscally prudent.

Since I do not have much time to 'manage' properties, is there anything in between managing your own property and putting your money into stock/bonds which might earn 5-15%? I like real estate because of the leverage but given my situation no lenders would give me money. As well, I am wondering if going to the US to invest is a better idea because where I live a three bed townhouse is around a million bucks which is on the low side in Vancouver, and there are so many places that are comparatively cheaper. Thanks! I was also reading about the Fourplex FIG group in UT and TX and the cash on cash returns are 4%? That's like nothing.

Hey Jeffrey congrats on saving $95,000 with no debt that’s awesome for anyone but even more impressive since you are 23.

If you’re interested in investing in real estate but want it to be on the more passive side then just plan to hire a professional property manager right out of the gates. If you price their cost (8-12%) into the deal from the beginning you can get the return you’re looking for without the day to day management. 

As an alternative you could look to househack a 2-3 family. I’d you're living there and have good tenants it’ll be easy to keep track of things. 

If you do it yourself, even with  paying a PM, you can get the returns you’re seeking. If you do it through a large company or a syndication it will be more passive but the returns will also be more limited. Unfortunately I don’t know of something, non-scammy, where you can pay into it and get a double digit guaranteed return. 
 

If I was a single guy with $95K I would take @Jonathan Bombaci advice and do a house hack! Find yourself a 2-4 unit and use a traditional loan... not sure what that looks like in Canada, but in the states it is just 3% down usually. So if you take your $95K... set aside $25K as an emergency fund, use $50K for a downpayment, then you could get a $1.6mil property (which should be doable in Vancouver).

Originally posted by @Jon Reed :

If I was a single guy with $95K I would take @Jonathan Bombaci advice and do a house hack! Find yourself a 2-4 unit and use a traditional loan... not sure what that looks like in Canada, but in the states it is just 3% down usually. So if you take your $95K... set aside $25K as an emergency fund, use $50K for a downpayment, then you could get a $1.6mil property (which should be doable in Vancouver).

There are no FHA type loans in Canada. Its normally 20% down. A Lender banks in Canada are very strict on lending.

Originally posted by @Jeffrey Kay :

Hi there,

I live in Vancouver Canada and am trying to figure out whether I should be investing in real estate. I currently have around 95,000 USD in cash savings, earning 2-3% in a HISA. I am 23, and am going back to school for a second degree in computer science. I previously completed a business degree. All the money I've saved has come from my side business, which I am currently running as well but the income is inconsistent. I have 0 credit card + student debt, and live with my parents. My cost of living is exceptionally low at this point; my tuition is covered by grants and I'd like to think myself as fairly fiscally prudent.

Since I do not have much time to 'manage' properties, is there anything in between managing your own property and putting your money into stock/bonds which might earn 5-15%? I like real estate because of the leverage but given my situation no lenders would give me money. As well, I am wondering if going to the US to invest is a better idea because where I live a three bed townhouse is around a million bucks which is on the low side in Vancouver, and there are so many places that are comparatively cheaper. Thanks! I was also reading about the Fourplex FIG group in UT and TX and the cash on cash returns are 4%? That's like nothing.

 With $95k USD you can invest in many markets in the mid west. You don't need to leverage as you can buy properties straight cash. Build a team, take a weekend flight to look at some properties and move forward on something that you like.. 

@Jeffrey Kay  House hack is a smart option @Jon Reed if you're looking to invest in Metro Vancouver. You may use the rental income to qualify for a mortgage. In Canada, the minimum down payment is 5% on the first $500K market value/purchase price and 10% on amount above $500K to $999,999. A $900K purchase would require a minimum down payment of $65,000. Your income must be able to service a mortgage of $835K plus the insurance (default) premium. Your side hustle income can be used if you can confirm 2 years of income via bank statements. If your income is not sufficient to service this debt, consider getting a co-signor. A co-signor is a close relative such as a parent, grandparents, siblings or spouse. If you some specific questions, don't hesitate to DM me. 

Originally posted by @Julie Toh :

@Jeffrey Kay  House hack is a smart option @Jon Reed if you're looking to invest in Metro Vancouver. You may use the rental income to qualify for a mortgage. In Canada, the minimum down payment is 5% on the first $500K market value/purchase price and 10% on amount above $500K to $999,999. A $900K purchase would require a minimum down payment of $65,000. Your income must be able to service a mortgage of $835K plus the insurance (default) premium. Your side hustle income can be used if you can confirm 2 years of income via bank statements. If your income is not sufficient to service this debt, consider getting a co-signor. A co-signor is a close relative such as a parent, grandparents, siblings or spouse. If you some specific questions, don't hesitate to DM me. 

Thanks for dropping the knowledge! It is awesome learning new things such as a tiered down payment % based on the property value. 

 

Thank you all for your responses!

@Julie Toh I don't intend to house hack. Right now my rent is $0 because I live at home (and partly the reason why I've saved so much). It seems like a lot of work for the potential to make a little cashflow and/or live for free. I've looked at places in Vancouver close to where I need to be and there are 0 properties that are cashflow positive even with house hacking.

I'm fine with a PM and lower returns in the US but I'd like to know what the returns could be like in my situation. I can easily fly anywhere in the US and pick out a property but it seems that it's risky too especially if you're relying or 1/2 tenants and/or need to get a mortgage. My parents (also Canadian) would potentially be willing to co-sign for a mortgage through a bank with both Can/US presence (e.g. TD Bank) and perhaps contribute as well, but the numbers need to be really good on that.

Would 10-15% COC be unrealistic?

Hi @Jeffrey Kay , investor here in North Vancouver. I have two strategies that an working right now. I'm looking to flip properties in some areas in B.C (Chilliwack, Mission, Abbortsford) and buy-and-hold in Edmonton. I have teams in place already which it takes a lot of work by the way. If you want to connect and meet up just let me know. Cheers!

If you want the higher returns, you can get into the development side of RE projects. There are a few out in Canada. They range in ROI from 12-25%. Your involvement in these would be screen the project (do you due diligence). Once you pick, there is no further work for you. The other option is lend our your money as a hard money lender. This will get you 12-15%. You can do this on your own or work with agents. Their fees are paid for by borrower.

In the B&H strategy, don't forget, the monthly cashflow is 1 thing, but appreciation growth is another. 

Originally posted by @Adrian Weiss :

Thanks @Julie Toh , that color is appreciated! Are there any considerations for structuring the mortgage to maximize cash flow?

 @Adrian Weiss To maximize cash flow, consider a 30 year amortization and/or a multi-component mortgage.