All Forum Posts by: James Ma

Always do hard credit checks on all tenants as the final step before offering a leasing agreement

I'm from Canada but I think the loan rules are pretty similar in the US.

Banks will give you a % of your property equity loaned to you in the refinance (ie. 80% of 500K clear title property will result in a 400K loan). This refinance is set up essentially the same as a mortgage on a new property would be  except its against your current property.

When you go to buy the new property, if your intent is to put down 20% only and ask for a mortgage to cover the remaining 80% of the cost, the banks will evaluate your debt to income ratio which your previous re-fi will show count towards your debt. If your income is high enough, they will still give you the mortgage.

Once the investment property is rented out, they count a portion of that rental income towards your income so if you're buying properties that cashflow well, it allows you to build a very nice domino effect of leverage since it doesn't impact your Debt to income ratio much (all the rental incomes pay for all the expenses including the mortgage)

I used this method myself to end up going from my one clear title primary residence worth around 600K to acquiring 5 rentals (~1.5M in value) in a few years. It got to the point where the main bottleneck became getting the 20% downpayment to put down and get the mortgages.

23 units is not small at all! It sounds like you're self managing so your own spreadsheet or your accountant's recommended spreadsheet should suffice. Or else you can hire someone to help look after this and admin related things ofc

sneaking in pets. Very hard to catch since they just claim that their friend came over with their pet and even if you see all the dog or cat related stuff, you need to get hard evidence with pictures to justify kicking them out

Did the previous landlord give you a copy of the movein inspection? I just sold a place and was surprised the new owner never reached out for that as now they cannot go after any damages as that could have already been the case when my tenants moved in.

Some great advice above already on dealing with the deposit  and the tenant, I don't think I can add more except hopefully you have a copy of the inspection if you are seeking to hold back damage expenses from the deposit

You always get richer by leveraging OPM (other ppl's money) at rates lower than you can get a return at. With current interest rates, I would def do 20% down

As Joe mentioned to answer your question, its not an either or scenario with these two different metrics, but I think you're not looking broadly enough and maximizing your returns should be the focus.

What strategy will get you the best returns (cash flow, equity paydown, appreciation) for the capital invested. If you are solely looking at cash flow % or CoC to determine what to buy, you will possibly be missing out on better opportunities

If that is the case, definitely sell it. Not a close decision

I would hold on to the property and continue to add to your portfolio over time. Your first option is going to trigger a ton of taxes, and commissions paid to realtors upon sale are also going to eat a ton into your investment growth.

As with any investment, it usually makes sense to keep your money there until a better investment opportunity shows itself. If you don't know what to do with the money and don't have a plan to redeploy the capital that will generate greater returns than where it currently sits, then selling at a certain price point (ie. you've 2x your investment) may not be ideal. Buying a property that is worth twice the previous property doesn't necessarily mean greater profits

Benefits of Syndication compared to traditional real estate ownership and management:

- passive income with no work needed from you at all

- economy of scale since you'll have more units that you can buy on your own

- diversified risk since units' vacancies are less impactful on your overall revenue

- team of professionals that should have experience and expertise if its a good syndicate

Cons of syndication compared to running your own real estate:

- Less or no input on decisions on managing the property

- Typically locked into a term where you cannot access your money for any reason

- Potentially better returns owning and managing your own property due to having to pay various fees to the syndication (ie. syndicates are often structured so they take an annual fee for management of the property operations, annual fee for handling property asset management, fee at the time of sale of any appreciation profits). Since you're going through RBC, I'm sure they will be taking a fee off you as well since you're not dealing directly with the syndicate.

The 1% management fee is actually on the low side compared to other syndicates and not high but I'd inquire about the other fees.

To sum it up, syndicates are great for people who don't want to be running their own real estate business but at the same time want to be reaping the gains and advantages of real estate. You still get to write off depreciation and all the other benefits associated with real estate but don't have to do anything to keep the property running. For some real estate investors, I also believe it actually may be wiser to do syndication instead of sinking all their money into one property if they're planning to buy and hold since it creates a better diversified holding.

I would look at the opportunity cost to evaluate what to do. You're going to have to eat a lot of costs with selling the place due to realtor fees, moving to a new home will cost money and time, penalties for mortgage break etc.

If you sell, what would the plan be for the new home and revenue stream? That's what I would ask yourself and figure out the numbers