Run Down House vs Newly built Condo

Canadian Real Estate
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Run Down House vs Newly built Condo

Alex Kovalenko
Member since 2020 · 76 posts · 45 votes

Hey sorry if this question gets asked 200 times here .. but here it goes.. 

Is it better to buy a run down (ie 1960s built) 3 bedroom, 2 bath house with minor renovations at $400k-$450k and rent it for $2k or new condo (2 bedrooms, 2 bath) $400k-$450k and rent it for similar $2k. 

The house would probably require $30k-$50k renovations and is in OK neighbourhood with not so great schools; while condo is in good neighbourhood with great school systems.. but has $500 condo fees a month.. 

gut feeling is that house would be better down the road (as it has a lot of land).. but i also feel like condo would be much easier to rent that a run down house.. i only see a few similar houses rented vs dozens of condos being rented every month

photo example of 2 bedroom $440k condo vs 3 bedroom $440k house

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Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
6y

 @Alex Kovalenko   you've got to be missing something in your analysis.  You keep mentioning positive cash flow, but this entire forum is telling you that it isn't there.  For most investors, cash flow is what's left after paying all expenses AND debt servicing (mortgage). As an example (guestimates on a 400K property in Hamilton based on past investing in Kitchener):

Income (rent): $2,000

Expenses (per month): $740

  • Property tax: $200
  • Insurance: $150
  • Property management: $100 (5% of gross rent, this would be very good)
  • Water tax: $40
  • Maintenance: $100
  • Capital improvements $100
  • Landscaping / snow removal: $50

NOI (Income - Expenses): $1260

Debt service (Mortgage), assuming 80% LTV, 3%: $~1,500

Cash flow = $-240/month (and that's being generous; I haven't allowed for vacancy). For a condo, drop the landscaping and capital improvements but add your condo fees; likely gets worse

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  • Alex Kovalenko
    OP
    Member since 2020 · 76 posts · 45 votes
    6y

    Thanks Adam @Adam Krawec - can you show me one example of multi dwelling for $150k each? Cant seem to find them that cheap

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  • Adam Krawec
    Member since 2018 · 47 posts · 16 votes
    6y

    Let me know if this link doesn't work, I can shoot over to you in an email. As you can imagine units at the lower end of the spectrum, regardless of shape sell fast.

    These sold in the last 6 months Sold multi-unit in Niagara

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  • Alex Kovalenko
    OP
    Member since 2020 · 76 posts · 45 votes
    6y

    I guess multi family are houses / buildings with multiple entrances.. so a house with basement would be considered multi family as well? Thanks!

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  • Adam Krawec
    Member since 2018 · 47 posts · 16 votes
    6y

    That is mostly correct, you have to be careful with zoning restrictions. Legally you can't just make any home a duplex without R2 designation, and then you need to follow proper guidlines to become a duplex. 

    However, there are a lot of homes out there used as multi-unit without city approval. While you can buy homes used in this way, you need to be aware if could affect getting building insurance or the city can shut you down and your back to a single family home. 

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  • Alex Kovalenko
    OP
    Member since 2020 · 76 posts · 45 votes
    6y

    R2 designation - how do you check for that?

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  • Adam Krawec
    Member since 2018 · 47 posts · 16 votes
    6y

    @Alex Kovalenko go to the city website you want to find zoning for, and look up zoning, usually under the planning department.

    Or type " zoning" into Google ie. "Niagara Falls Zoning"

    No one city makes it easy to find in my experience.

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