About my personal finance & money :

  • I am 24 living in Quebec city, Canada;
  • I earn a stable 75k/y + some unstable freelance revenue (20k last year);
  • I own a 220k house for which I have a 114k mortage at 3.2%;
  • I have perhaps 15-20k in other cash/assets;
  • My mortage is on 25/y, it costs me 572/month
  • I have no other payment except electricity, food and other cheap stuff. No car payment.

Context :

  • I am heading to the bank on friday to see how much I can afford to invest in real-estate;
  • I am not willing to take an insurance on the loan so that I can keep this possibility for further not-so-far investment which means that I need to give 20% cash down (at least where I live);
  • The banker will tell me that I can take 80% of the difference between my house's value and my current mortage (220-114*0.8=84.8) as a cash down. That cash would then be added to my current mortage which would lead me to a 198.8k mortage and +85k in my bank account;
  • With that 85k cash down, assuming that I have an acceptable plan, the bank will then accept to lend me 340k which would lead me to a 425k potential investment;

For simplicity's sake of the question, let's assume that the 425k loan is on the same account.

Given the following scenario :

  • A 400k duplex built in 2007 in very good shape (no renovations needed);
  • Income of 26.1k/y (one 4 1/2 and one 8 1/2);
  • The 4 1/2 is currently already signed until 2018, same client since 4 years;
  • Paper that proves that both doors have always been rent;
  • 400k loan on 25 years at 3.5% would lead me to payments of approx 24k/y;
  • Municipal evaluation of 400k;
  • I might be able to end the deal at around 380k and save an extra 20k;

I understand that I can probably leverage the mortage time to, say 30-35 years, but while I will definitely try to do that, the average where I live goes at 25 so I prefer to do the math with that.

My conclusion is that the loan would pay itself(ish) except in case of renovations, or trouble finding someone to rent etc. Also it does not look very risky as I would actually be able to pay the 400k loan with my income in case of long-time without renting.

I personally think that it is a decent investment because the 400k would pay itself during all these years, but I'm still hesitating as I'm not sure if people usually make higher ROI for such plan and I honestly don't have anyone around me to ask.

Now my questions is : Does that looks like a decent investment or is there any other fees that I may have forgotten which would make this a negative investment ?

Addenda :

  • The market where I live is currently great for buyers - buildings sells for municipal evaluation which is something that was very very rare few years ago;
  • The building is located in a quite prestigious district which lead me to think that I may benefit from other's development in the following municipal evaluation. Suppose it goes up 20k in the next year *0.8 then that's 16k more cash down that I can use for other investments.
  • There might be some other buildings with a better ROI out there, but the truth is that each time I find something with a higher ROI, the building is old and would end up in a bigger investment of money and management time. I am currently a full time student and full time employee so "management time" is quite precious for me;
  • 1
    Just curious, what do you mean by: "Income of 26.1k/y (one 4 1/2 and one 8 1/2)?" The annual income makes sense, but the part in parenthesis I don't follow.
    – Hart CO
    Commented May 31, 2017 at 1:15
  • @HartCO One door with 4 rooms for approx 900/months and the 8 rooms one for approx 1400/months
    – poor guy
    Commented May 31, 2017 at 1:54
  • You may wish to consider the effect of property taxes on your net rental income. I don't know what the rates are like in Quebec, but here in BC property taxes could easily knock 10% off your rental income.
    – not-nick
    Commented May 31, 2017 at 1:55
  • @HartCO The "1/2" is for the bathroom, this is actually how we call it where I live
    – poor guy
    Commented May 31, 2017 at 1:55

2 Answers 2


Congratulations, you are in great shape financially at a very young age. Great income, nice equity in a home, and mostly debt free.

It seems like you are looking at taking out a loan of 400K, and to do so you will have to put your own home at risk as you do not have the 80K cash for a down payment. Correct? It also looks like after 2.1K per year without regard to taxes, maintenance, bad tenants, or vacancies. As such this will likely be a negative cash flow situation. I would say you should plan on a 912/month cost. Are you okay with that? While your income can probably cover this, no problem, is that your objective to have this property have a negative return for the next 10-15 years or so?

For me, this is a no. Way too much risk for a negative cash flow. It is hard to talk to the upside as you did not give any profit predictions and I am unsure of the market.

Why would you risk jeopardizing your great financial situation with a "hail mary" attempt to make money? Slow down, you will get there. Save for a few years so there is no need to tap your home's equity to make a down payment. It would really bother me to owe 600K on a 121K salary (75K+20K+26K).

  • 2
    Nailed it. Also consider the large risk: if interest rates rise 1% in the next few years your rental income is now lower than the mortgage payment. After property taxes, insurance, maintenance, other fees - the price is too high even for the equity portion of the mortgage to compensate.
    – Chris
    Commented Jun 6, 2017 at 23:04

This might be a good idea, depending on your personality and inclinations. Key points:

  • How close is the building to you? Do not buy any building that is more than 20 minutes travel from where you are.

  • Do you have any real hard experience with doing construction, building maintenance and repair? Do you have tools? Example: do you have a reciprocating saw? do you know what a reciprocating saw is? If your answer to both those questions is "no", think twice about acquiring a property that involves renovation.

  • Renovation costs can be crushing, especially for someone who is not an experienced carpenter and electrician. Take your estimates of costs and quadruple them. Can you still afford it?

  • Do you want to be a landlord? Being a landlord is a job. You will be called in the middle of the night by tenants who want their toilet to get fixed and stuff like that. Is that what you want to spend your time doing, driving 20 minutes to change lightbulbs and fix toilets?

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