Your Biggest Real Estate Questions Answered:
What Should I Do?
Rev N You Newsletter Reader Questions
Answered
by Julie Broad
 This is the final question in a
3 part series answering a few of our newsletter
subscribers biggest real estate investing questions.
Two of the previous questions and answers can be found
here:
This week's email is from Scott in Toronto, Canada:
Hey Julie and Dave,
I purchased a property in downtown Toronto [Julie edited
out the location and a few other details] nearly two years
ago for $329K (putting 25%
down) which will rent out furnished for approx. $2500
(below the 1% rule and just
above .7% - loved that article by the way).
I have occupied this property since the purchase, but am
looking to make this rental property #1. It is fully
managed, with a maintenance cost (which keeps rising!) and
has since appreciated to approx $345K.
Here's the tough part, I prefer to have the property
management here
take care of finding a tenant (it is my first one and all)
but they want to
charge a month's rent in order to do so. This is standard,
but unfortunately, it puts my monthly cash flow in the
negative by about $35 a month ($420 total).
Alternatively, I can try and place it on my own and
eliminate that fee
which would provide me with a positive monthly CF of either
~$175 or
$85 if I have to still give a realtor half of the month for
bringing me
the tenant. Either way, my mortgage is a ridiculous rate of
prime -0.85%
(1.4%) variable open until March 2013, but can be switched
to a fixed
mortgage at any time without fees (and if done, could
actually lower my
mortgage payment depending on the amortization used).
Do you think it makes sense to operate at a
negative cash
flow while the financing is so advantageous?
I realize this banks on
property appreciation predominantly, but even if the value
stays
stable (now that we are theoretically at the bottom ; ) you
have
somebody else creating equity for you and that's not a bad
thing.
Cheers,
Scott
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