Like many veteran investors, I get bored from time to time and stray from my proven formula for passive income. We all have a story like this: the lesson learned, the wise advice we can give to those who seek it. This is one of those lessons, and I hope you can learn from it.

As the name Zen Investor implies, My investment style has always been to look for renovated or new condominiums with a management company already in place and positive and passive cash flow.. Not that I am against the daily routines of property management (although I must admit I have better things to do with my time), but I developed this investment model out of necessity: always busy looking for the next ideal ripe market. project, I travel months out of the year and I just can’t give each project the time required for a quality management program.

But as I mentioned before, sometimes I like to taste the water, just to see how it feels. Well boy, did I get burned!

What was the beast that brought me down? A competitively priced 11-plex in the heart of Montreal, Quebec, conveniently located near a hospital and university.

Sounds pretty good, doesn’t it? Well, let’s take a closer look.

Do not misunderstand – I know buying a multiplex is a different animal than buying managed condos. It is not the same type of investment, far from it. But let’s take this experience to see HOW different it turned out to be compared to my typical condo investment model.

the multiplex

Cap Rate¹:

5% Cash in cash: 3%

Potential appreciation: 3% per annum

The Managed Condominium

Cap Rate¹: 7%

Cash flow²: 12%

Potential appreciation: minimum 3% per year

¹ Net rent without mortgage / sale price

² Cash back cash on my down payment

If those numbers don’t have you convinced, don’t worry, it gets worse.

First of all, after interviewing a thousand and one management companies, I realized that outsourcing the management of a building with less than 11 doors was simply not profitable. I began to imagine myself with a wrench in my hand, chasing rent checks, wondering how much money I would have to set aside for advertising. It’s not a pretty picture.

But it’s not just that he’s allergic to elbow grease. The numbers at the multiplex began to look very bad when inspection revealed that $30,000 worth of bricks were needed for the building. My cash back was down to 2-3% in the first three years, and I could only pray for 5-6% cash back in year four.

Which finally makes me feel like I’m running to my Zen Investor model of buying managed condos in bulk. Let’s face it, it’s hard to beat. And there are too many things that work against investing in multiplexes: ROI and cap rates are much lower, so you have the time and effort to manage tenants, the business risk of non-paying tenants, the major maintenance and repairs involved with these older buildings. …

So unless someone can convince me otherwise, I’ll stick with what I know works: the Zen Investor model. Life is too short not to be a zen investor!