Value of my rental Property

  • kirkkimberley

    Status: Forum Member

    Posts: 12
    Joined: 13 Mar 2010
    From:

     Hello,

    My Rental Property is valued at $280,000 (for the land and house) in Lloydminster.

    The profit per year is $38,600.

    Can add the asset value of $280,000 plus the income generation to find the value of the property?  Or is it one or the other?

    Thanks,
    Kirk
  • MaximeValmont

    Status: Forum Member

    Posts: 142
    Joined: 24 Sep 2011
    From: Montreal



    Your building is worth 280 000$. The appraiser took the 38 600 and made some calculations, then came up to the 280 000$
    B.Comm,

    M.Sc Finance

    Candidate member at the appraisal institute of Canada.
  • kirkkimberley

    Status: Forum Member

    Posts: 12
    Joined: 13 Mar 2010
    From:

    Hello,

    Sorry, maybe I was not clear.

    If a person was to buy the home right now, and not rent it out, it is worth $280,000.

    Using a Cap calculation, it is worth $280,000 (funny how that worked out) - based on the profit.

    Do I get to add the value of the asset with the income profit, or is it only worth $280k?

    Thanks,
    Kirk
  • MaximeValmont

    Status: Forum Member

    Posts: 142
    Joined: 24 Sep 2011
    From: Montreal

     

    But who told you that " If someone buy the house right now and not rent it out it will be worth 280 000"?


    And what do you mean using cap calculation? It's a house
    B.Comm,

    M.Sc Finance

    Candidate member at the appraisal institute of Canada.
  • kirkkimberley

    Status: Forum Member

    Posts: 12
    Joined: 13 Mar 2010
    From:

    I used comparables in the area; a house with our size, age, etc.. sells for $280,000.

    Cap calc - Found it online "Capitalization Rate Calculation"

    Kirk
  • MaximeValmont

    Status: Forum Member

    Posts: 142
    Joined: 24 Sep 2011
    From: Montreal


    I might be wrong on that one since I don't really appraise single homes,

    But i'm pretty sure the appraiser will use the cost and comparison approach to determine the value of your house.

    So even if you rent your house 100$ more per month, I don't think it will change anything. The bottom line is that the people that are going to buy your house in the future will buy it to live in it, not to rent it.  I would even not bu suprised to learn that the fact that your house is leased for one year might reduced the value, if nobody wants to buy a house that is already rented.

    Anyway, Keep looking for answers because i'm not 100% sure on that one. Come back with commercial buildings and i'll be 100% sure





    B.Comm,

    M.Sc Finance

    Candidate member at the appraisal institute of Canada.
  • brentdavies

    Status: Forum Member

    Posts: 576
    Joined: 31 Aug 2007
    From: Edmonton, Alberta

    3 methods to determine value

    Market value, what a willing buyer will pay from a willing seller. The most common price used for single family houses in a town or city like Lloydminster.

    Cost or Replacement Value- What the cost would be to buy the land and construct a similar property.
          Commonly used for special use properties such as chuches, schools, etc.

    Income approach for income properties. Methods used to establish value include using cap rates and  gross rent multipliers with the income of the property. Single family properties or suited properties do not qualify. 4 units or more in a building is the starting point.

    What you may have is a great single family property that will pay the mortgage and make the owner lots of money.  The next owner may replace the renter with his family and the income dissappears.
    Brent Davies, REALTOR
    Associate Broker, Commercial Division Member
    RE/MAX Real Estate, Edmonton, Email Brent@brentdavies.com
    780-488-4000, Cell 780-974-0252
    Edmonton Apartment Association, President, 2012
    REIN Michael Millenaar Memorial Leadership Award, Nothern Alberta, 2011
  • garyyeung

    Status: REIN™ Member

    Posts: 13
    Joined: 26 Jul 2009
    From:

    Hi Kirk,

    I have some townhouses in Lloydminster. 
    Just wondering, how much rent are you getting for the main floor? and how for the basement?

    Thanks,
    Gary 
  • kirkkimberley

    Status: Forum Member

    Posts: 12
    Joined: 13 Mar 2010
    From:

     Hello Gary,

    The house is broken into three suites - the basement is a 3-bedrooom, the main is a 3 bedroom, and the upper is a one bedroom.

    I am getting $1600 for the basement suite, $1800 for the main level, and $1000 for the upper.

    I have been in property management for a while, and am able to yield manage the unit to their full potential.

    Thanks,
    Kirk
  • garyyeung

    Status: REIN™ Member

    Posts: 13
    Joined: 26 Jul 2009
    From:

    Hi Kirk,

    Those are excellent rents.  Do you manage the property yourself or do you hire an on-site person?

    What do you think about the future of Lloydminster's economy? say 5 years

    Thanks,
    Gary
  • kirkkimberley

    Status: Forum Member

    Posts: 12
    Joined: 13 Mar 2010
    From:

     Hello Gary,

    Yes I have been managing them myself.  It would be very hard to find a property manager that can get results like that.

    This property is now at the point that it can be taken over by a management company very easily, hence the reason I am looking to sell (if the price is right).

    The economy is booming again already.  I own four companies in Lloydminster, and can see results from the boom already.

    I am always looking for investors, so if you are interested, let me know.  I always return good money to investors.

    Thanks,
    Kirk
  • kirkkimberley

    Status: Forum Member

    Posts: 12
    Joined: 13 Mar 2010
    From:

     Hello Brent,

    I appreciate a single family home not being in that equation, but there has to be something said for a house generating $4200 per month in revenue.

    If I am buying a company, I want a 100% return on my money in the first year.  So, if I buy a company for $100,000 I want it to generate $100,000 in profit in the first year.

    I was wondering if I can do this in real estate.  Lets say an investor puts 10% towards a mortgage or loan, and wants a 100% return on his/her investment.  So, if they buy a $380,000 house, and they put 10% down, $38,000.  With my home, they would have that money back in the first year - 100% return.  Then infinite after that.

    Does it work that way?

    I am going to be asking $375,000 for this income property - with $38,000 per year revenue.  Is it attractive to an investor?


    Kirk
  • ThomasBeyer

    Status: REIN™ Member

    Posts: 9,906
    Joined: 30 Aug 2007
    From: Alberta and BC - The Top 2 Places on the Planet to live and invest !

    kirkkimberley

    If I am buying a company, I want a 100% return on my money in the first year.  

    Impressive.

    What kind of companies are those ?

    If you can consistently do that then real estate may not be for you.

    You can do 100% cash-on-cash ONLY in rare circumstances in a (re)development deal with high debt. In a buy-and-hold it is more like 8-15%.

    You need to value your time somehow.

    cash-on-cash is one figure (green $s), hours spent is another (blue $s.)
     
    Thomas Beyer, Honorary REIN Member & Member REIN Advisory Board
    President, Prestigious Properties [@facebook .. @twitter]
    T: 403-678-3330 E: tbeyer at prestprop dot com - www.prestprop.com

    >>> Read here how use your RRSP or TFSA for real estate or  here for our latest investment opportunity in Alberta for as little as $20,000 <<<
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  • MaximeValmont

    Status: Forum Member

    Posts: 142
    Joined: 24 Sep 2011
    From: Montreal

    The only way you'll make these numbers is by buying really undervaluated property and selling them at market value.
    B.Comm,

    M.Sc Finance

    Candidate member at the appraisal institute of Canada.
  • Rickson9

    Status: Forum Member

    Posts: 837
    Joined: 27 Oct 2009
    From:

    kirkkimberley
    I am going to be asking $375,000 for this income property - with $38,000 per year revenue.  Is it attractive to an investor?


    It depends on the investor.

    I would only pay $190-$200k for that kind of revenue stream, but I'm only speaking for myself.  Good luck.  I hope you get your number!
      
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