7th Income Source – Real Estate
7th Income Source – Real Estate
It is time to start seriously looking into creating our 7th source of income for our household. It has been almost a year since we last added our 6th source of income – Solar Panels.
If you have been following me for a little while, I’m sure you know how big a fan I am of multiple streams of income. It has been stated lots of times on the internet that the average millionaire has 7 different sources of income.
We want to be (and will be) millionaire’s one day. So one of the best things we can do to achieve that, is simply emulating what they are doing. Start slowly, but don’t stop! Little by little, day by day we grow.
As I mentioned already, we have already created 6 different income sources for us. They are –
- My Job – Landscaper
- Wife’s Job – Hygienist (Currently on mat leave)
- Dividend’s – Started Investing January 2016
- Private Investment – 12% rate of return
- Website Ads & Affiliate’s – Coffee money… =)
- Solar Panels – 10kw system on our roof.
Both me and the wife’s jobs have been around for awhile. In 2016 we started dividend investing. The beginning of 2017 I decided to make the website and things took off. We added our 4th, 5th and 6th income source all in 2017. Feel free to check out How We Increased Our Forward Income By $12,000 In One Year to see how we did it.
2018 has been slower on the investment front. With the wife on mat leave our income has been reduced for sure, but we make sure to always be putting some money to work in the market. I really was not expecting to pursue the almighty 7th source – Real Estate, but I feel the stars aligned and something keeps pushing me to not put it off anymore.
I have known for quite a while that real estate will most likely be our 7th passive income source. We live in the Gta though, real estate here is not cheap! Seriously……. I cant stress this enough.
One of my best friend’s has 3 houses now and has done very well with real estate, but he hasn’t bought a unit for awhile. I don’t think prices here really offer a great value from a investment point of view at current prices at the moment. To give you an example new build townhouses in the area I live sell for 500-600k before they are even built!!!! wtf….
So I always said the next big crash we buy either a cottage to air bnb or a townhouse to rent out.
Recently the picture has widened though, My viewpoint has changed to a landscape portrait. This is in big part again to the community. The choose-fi podcast is a great source of information and you hear some guests talk about real estate and hiring property managers to fix that problem. Bloggers like Cheesy Finance showing real world number’s and scenarios about her rentals and experiences.
It makes me want to at least dip my toes in and get my feet wet, who knows maybe there’s a glimpse of some treasure down there and we will have to dive in!
Houses under 200k?
My sister lives 2 hours away from me. She moved to get away from the city, start a new life and probably for the cheaper cost of living. (The more I hear about Geoarbitrage, the more I think why don’t we as well? Then the wife says no….. so we move on haha)
Anyways she recently shared a real estate post of her friends. (who is a agent) It is a 3 bedroom house 1 bath, finished basement. 1/4 acre lot, steel roof on house and separate garage and 2 car driveway in a great mature part of town for 190k….. wtf! This to me is unheard of! I’m used to gta prices. I asked what the approx rent would be and she told me $1,300- $1,450 plus utilities. Yup, another wtf moment was had.
O.K. now my brain is firing all over the place, this could really work! Make another coffee and start typing some numbers into a mortgage calculator. I know we need to put 20% down so we will be working with a 152k balance.
Wow, here is a rental investment that really works! And its the first house I looked at (online) in my sisters area. So we are in the $500-650 a month cash flow minus property taxes (1300-1400 yr), insurance and property manager fees. $300 of the mortgage payment also go’s down off the principal roughly a month as well. This seriously looks good and caught my attention.
If we factor about $130 a month for property taxes, $50 for insurance and 10% of rent for property manager (if i do this) our monthly cost would be $1117.08. Therefore our net worth would increase by approximately $500-600 a month plus hopefully house appreciation over time. Not Bad!
Of Course we need to factor in that initial investment. If we paid full price we would need 38 thousand and maybe like 4,000 in lawyer fees/ closing costs, home inspection etc. That would come right from our tfsa account and we would lose that dividend income. Let’s use a 5% dividend yield, which is most likely higher then my portfolio average. Losing $2,100 in dividend income.
From strictly a numbers perspective that is a solid increase $6000-7200 a year vs the $2100 in dividend income. Of course these numbers will fluctuate. Housing repairs, vacancies, dividend increases etc.
There are a bunch of houses in this price range, as well as cheaper ones but in a worse area. (think Ill avoid those)
Things look good, so whats next?
We all tend to be a little nervous about things we don’t know much about. As much as I would love to get into the real estate investing sector, me and the wife are no expert. We are lucky that my friend has experience, as well as her family. To be truly confident in our decision though, we need to know what we are doing first.
I just started reading this incredible book on Canadian real estate investing that seems to be full of information. Making Money in Real Estate: The Canadian Guide to Profitable Investment in Residential Property, Revised Edition (Amazon Affiliate) Its a big book and full of new terms so it will take a little bit to digest. (Note – I found it at Value Village, I tend to find most of my books there these days)
I’m trying to find and follow more real estate bloggers who love to share their stories both good and bad, as well as the numbers behind the investment.
I need to read more about cap rates, The Ontario tenancy act and the 1% rule.
My eyes are now open, it definitely is a option. That elusive 7th Income source, can become reality. While I am in no real rush, I talked to a real estate agent friend today who said she tells her clients to not list until February. The market is slow in the winter and if I want the best deals as a buyer, right before Christmas may be the best time to make a low offer. People could use the money and want to celebrate the sale of their house over the holidays. Let them pick the closing date and they are happy.
Also pulling out all this money from our Tfsa this year would let us reuse that contribution room next year. Which is a nice bonus!
What do you think? Would you want to own real estate rentals? What kind would you rather have? townhouses, freeholds, duplex’s, multi units etc.
Do you have any advice for me if you have rentals? Would you be interested in doing a interview questionnaire?
Any great real estate related blogs, books or podcasts I should checkout?
I’ll do my best to continue to get schooled and keep you posted on what we are doing.
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.