Garage Construction & Rental

We have a massive lot where there is a duplexed home and the majority of the lot is empty unproductive land... undeveloped unproductive land is extra land on which we pay property tax on. That sucks.

I went to the city to ask for this particular lot to be considered zoned to allow at the very least a triplex or a fourplex, realizing that this empty land isn't maximizing it's "highest and best use" of that part of the property.

But the city won't grant anything more than a duplex. They went on to basically say I'd be wasting my time filling out the paperwork to try & make it happen.

It is for Property SIX. It is zoned a duplex and it is actively used as a duplex so I've fully maximized it's potential.

Or have I?

Property SIX does not have a garage. The city said that I could add a garage, which made me consider the following:

1. In trying to make the highest & best use of the property, I could add a garage and rent it out.
2. In adding a garage, I could use my concrete workers connection that has been used to create the concrete steps at Property SIX to extend to the end of the large lot and construct the foundation (more concrete) from there.
3. The garage can then be constructed for total costs of about $40,000 I'm thinkin'. This would be borrowed funds leveraged from one of the other recently renovated properties via private investor. At 10% interest rate this equates to monthly payments of $333.
4. The $40,000 would be used to create a ranch like house (er, *ahem* "garage") with a main floor kitchen, bathroom & living room, then two additional rooms upstairs. Landscaping & parking in front.
5. Advertise "cute & unique 2 bedroom private home for rent $850 a month". Instant positive cash flow of $500 a month to be applied to other investments.
6. Rent the property using a warehouse garage lease, NOT a residential lease.

Lots more to consider of course, this is just rough idea of plan...

Why do this?

Why not just use that $40,000 as a down payment on another property? Good question to consider...

For one, just using it as a DP on another property would likely result in breakeven cashflow at best. And legal fees. And mortgage set-up fees. New property taxes, new ownership change fees, blah, blah, blah.

In this case, the $40,000 would generate approx $500 a month in positive cashflow right off the bat, even more if I go through a bank at 5% interest rate instead of a private investor.

And at this point I have net-worth trending in the right direction and set-up to continue going in the right direction. I don't have any freedom right now.

Paying all cash from our $40,000 savings to construct this, and then renting the place for $850 a month means that we would get our $40,000 back in 47 months, or approx 4 years. Thus, after 4 years we would have our $40k money completely back and would be collecting $850 a month for free (minus tenant headaches, maintenance, hassles etc...).

Freedom is the name of the game and $500 is a step in the right direction in the plan to replace existing emplyment income...

PROPERTY SIX RENOVATIONS - The Plan Part One

The upper unit of Property SIX is (finally) about to be significantly overhauled via extensive renovations!

We have approx $24,000.00 budget set aside... but we do also have a significant cushion in case of contractor 'overages'.

Mandatory renovation requirements are as follows:

1. Those who did the concrete work at the front of the home offered to replace the side of the driveway... We will now take them up on this offer as we now must correct the structural deficiencies such as the foundation by the driveway. Water is sloped towards the home, this needs to be rectified to avoid further basement water damage. Find out quote from grant, then ask concrete contractor to see if they can do everything including full stamped driveway and concrete side platform for the grant estimation... Throw in extra work for lower cost too (Property SEVEN). Depending on the cost, we may be able to have the stamped concrete continue into a full driveway.
2. The upper unit warped hardwood flooring must be replaced. Must use a light colour hardwood flooring as light coloured flooring makes the place look more spacious as opposed to dark flooring.
3. New bathroom MUST be gutted and new shower installed that doesn't leak.
4. New plumbing must be done properly and to code.
5. Toilet must be lowered & ceiling on main floor must be lowered slightly to make the upper unit toilet level with new floor.
6. A gutter-like trench must be dug at side of home with all the weeds removed.

Great ROI Bang-for-the-Buck renovations to be completed with remaining funds:

1. We will be buying two brand new beautiful front doors. New top-of-the-line door handles to be installed.
2. New light fixtures to be installed in upper unit throughout & new ceiling fan. Costco has semi-flush lights on sale for $30.00 each...
3. Brand new windows throughout the entire property to replace old nonfunctional windows. Installed by the person who previously installed the three kitchen windows? Bay window to be converted to three new windows at front.
4. Ikea kitchen in upper unit to be added for cheap. Labour provided by our reliable and very experienced handyman who charges roughly $25 an hour. Ikea Island to be added in new flooring for extra cupboard space for tenant.
5. New backyard sliding door to be added.
6. Property to be significantly weeded and trimmed while taking out some unnecessary bushes which are trapping moisture against the structure, where canal is to be dug.
7. Take down sides of side deck & remove precast concrete rails, or just remove the concrete steps and build wooden matching steps and stain them.... Or just take it all down and create a concrete platform like the front (see mandatory renovation requirement repairs point one above).
   

Updated Property Info and Cashflow

Here is the updated Cashflow situation for all properties.

Click on the side links for details on each property for more information. I'll start with the total cashflow situation:Here is the cashflow breakdown according to each property: Here are more property breakdowns: Cashflow is still negative but much improved from before...

Property SIX

Our Sixth Property Purchased: London Ontario Duplex Aug 2006.

The $60,000 is an inter-alia mortgage that was done by a private lender who took equity from both Property One and Property Two. This was our down-payment for This sixth property. This duplex has been zoned as a duplex and has had a long-term tenant in the upstairs unit who pays all cash each month. We bought this when we first lived out West and negotiated a great deal on this place, mainly because the main floor was vacant at the time. Also, it was a good deal because apparently there were some nightmare tenants in which one died in a horrible accident within the house. The seller had enough of property, the management, and the tenants & wanted a quick sell.

This property is great for student rentals and is within walking distance to downtown and is on a quiet street. The idea of managing students made me sick, so I hired a property management company to properly manage it instead. Student rentals get excellent cashflow in London if one is ok with having to fix up the home after they leave (the above market rental income usually pays for it easily). We lived out West at the time anyways, so hiring a management company was the best move at that time. It was right before school started and London was crawling for students looking for a home. According to my property manager, they were looking everywhere but our duplex.

It sat vacant for 3 months. We were burning cash. It was a horribly stressful time.

I kept pressing the management company but got nothing but excuses in return. Finally, after making the permanent move to Ontario, I drove up to it and took my first look at the home's condition. It was disgusting. The lawn had grown so high that it was covering the windows. The place looked like it was falling apart. Weeds were all over the place. A latern on the front porch was broken and dangling upside down. Anyways, I spent the week hiring painters, landscaping it myself and adding curb appeal.

We rented it in no time and the tenants were so excited we got a multi-year lease. Need less to say, we fired the awful management company. It felt great to have control over the stressful property ourselves and steer it back in the right direction.

Since then we've been in business with this home and very happy with the property and the way it fits into our portfolio.