And as to a “purchase price of no more than 100 times the gross monthly rent” rule. Ha that’s a funny one too.

[...] real estate holdings consist of a primary residence plus a rental property. The value of the principal residence remains valued at the purchase price despite significant [...]

[...] debt” and “bad debt”, tax savings strategies and how to find and buy more real estate investments using joint [...]

[...] is the story: We’ve got a rental property which we decided to try and sell. We located an investor who is interested. We’ve agreed on a [...]

[...] is $1,300/month, the property would be barely cash flow positive over  a 15 year amortization (my number one rule).  If Mark is determined to make this work, he would need to contribute a large down [...]

Just my 2 cents.

[...] For me,  I will most likely keep the existing HELOC balance (and portfolio) but use the freed up cash flow to invest with instead of increasing the investment loan.  Perhaps it’s my conservative side coming out, but why leverage if cash is available to invest with?  I may, on occasion, dip into the HELOC balance to invest in opportunities that require large amounts of cash, such as an investment real estate transaction. [...]

that 200x the monthly rental income sounds very scary :)

but if it works on paper and works well then 200x could be ok.

FT is right about the 10x rule. (All these rules seemed so silly to me at first, now they leap out of my mouth at every opportunity.)

Basically it goes that when scanning prospective properties to see if you should look at them in more depth they need to have a sale price of NO MORE than 10x the ANNUAL GROSS RENTS.

To make it more simple, mulitiply the monthly rent by 120x and it should be GREATER than the sale price. If this is true then you should look at the property in more depth.

So 200x seems out of the ballpark but….others things can come into play.
You should get yourself a good analysis spreadsheet and work it out like that.

I hear alot of talk about people accepting negitive cashflows on multi-units so that they can get the capital gain. I am of the school cashflow is King. Capital gain is excellent but I personally prefer the nice 4 extra paychecks that I get every month, especially considering our current economic situ.

So if this deal doesnt work, just keep looking.

To quote one of the best investors par none:

Be fearful when others are greedy
Be greedy when others are fearful.

I just found this blog and read brent’s rules and Ottawaguy’s response.

I am looking at buying a triplex. I have about 33% I could put down (but plan to hold some back for contingency and immediate expenses). With the mortgage at current (low) rates, I would have a +ve cash flow for 5 year. I plan to live in one of the 3 units. The purchase price is about 200x the monthly rental income.

Does that sound scary??

I live in a place where vacancy rates are super low – about .3%, and the triplex is in an area that is highly desirable.

Thoughts?

Thanks.

.For buying income properties:

1. stick with multi-unit properties (avoid single residence units)
2. purchase price of no more than 100 times the gross monthly rent.
3. living in one of the units makes it more manageable
4. be weary of buying when prices are high (relative to income) and interest rates are low (prefer a regime where prices are historically low relative to income, interest rates are moderate, and you have a 20% plus down payment)

I own 4 rentals and I don’t completely agree with what he said:

1. stick with multi-unit properties (avoid single residence units)

Avoid Multi units, buy single families freeholds or condos, especially when you are new. Multi’s are considerably more hassle, if a crime is committed in or near your multi it affects all your units within a multi, not true with singles in different locations. Single can be bought at wholesale and sold at retail. Multi’s are bought by investors and sold to investors, investors as we all know are looking for a deal ALWAYS.

3. Living in one of the units makes it more manageable

Only if you are single. As a married person, I would not want my tenants coming down to my unit to bother me for every little thing that is wrong. A clogged toilet, a wasp in the kitchen, another tenants loud music…etc, etc.

Living away from your tenants means that they have to solve problems on their own, if it is a big problem they will call. The type that you would want to be involved with anyways.

4. be weary of buying when prices are high (relative to income) and interest rates are low (prefer a regime where prices are historically low relative to income, interest rates are moderate, and you have a 20% plus down payment)

I partly agree with this statement, 20% plus as a down payment is very important (20/20/35 Rule: 20% down min, 20% under market value (not asking price) and 35 year mortgage).

The right time to buy is NOW. look for deals, they are everywhere. My last 2 deals net $900/ month each and they are both condos under 200K in Ottawa. Don’t try to time the market get in there and do your homework and your will find a deal.

1. stick with multi-unit properties (avoid single residence units)
2. purchase price of no more than 100 times the gross monthly rent.
3. living in one of the units makes it more manageable
4. be weary of buying when prices are high (relative to income) and interest rates are low (prefer a regime where prices are historically low relative to income, interest rates are moderate, and you have a 20% plus downpayment)

With the present economic turmoil, there are strong indicators that the Canadian market place will continue to outperform. Real estate is a long term game and should be viewed with a telescope not a microscope. Keep it simple and boring and you will build an empire.