Financial analysis of a triplex - some help needed

[lightfoot]

Hello,

I am very new to real estate and wish to buy my first property ever. I am 45 years old and live in Montreal. I have some cash for a good side downpayment. I would intend to live in one of the three units. I currenlty rent an apartment.

My question is: When doing a cashflow analysis, should I consider that I don`t live there and consider the "rent that would otherwsie be paid" as if it were paid by someone else? Or should I do the analysis on the cashflow from the two rented apartments only?

What is the industry standard for this type of analysis, so to speak?

Thanks,

Steve

 

[Anonymous]

Hi Steve,

My wife and I did the same thing last year. We live in one unit of our triplex.

When we were doing the analysis we tried to estimate what market rent would be for the unit we lived in in. The thought was that even though our intent was to live there until we sell it, there is always the possibility of moving out sooner, and eventually selling it fully tenanted with the highest rents we can get.

Hope this helps! Mathias.



QUOTE (lightfoot @ Jul 5 2010, 09:11 PM) Hello,

I am very new to real estate and wish to buy my first property ever. I am 45 years old and live in Montreal. I have some cash for a good side downpayment. I would intend to live in one of the three units. I currenlty rent an apartment.

My question is: When doing a cashflow analysis, should I consider that I don`t live there and consider the "rent that would otherwsie be paid" as if it were paid by someone else? Or should I do the analysis on the cashflow from the two rented apartments only?

What is the industry standard for this type of analysis, so to speak?

Thanks,

Steve

 

[Thomas Beyer]

QUOTE (lightfoot @ Jul 5 2010, 06:11 PM) ..When doing a cashflow analysis, should I consider that I don`t live there and consider the "rent that would otherwsie be paid" as if it were paid by someone else? ..
yes.

Consider also if you wish to live so close to tenants as you may have to evict them if they party or do drugs or frequently pay late .. and that is hard if you live close or get to know them well !!

 

[lightfoot]

Hi Mathias,

Ok, thank you, that helps. I assume then that (obviously) with three tenants the place has to cash flow, but if you live in one apartment then maybe it can not net cashflow per se (meaning that you still have to pay some "rent" to yourself so to speak).

Is that correct?

Thanks, Steve





QUOTE (matmuleme @ Jul 6 2010, 08:38 PM) Hi Steve,

My wife and I did the same thing last year. We live in one unit of our triplex.

When we were doing the analysis we tried to estimate what market rent would be for the unit we lived in in. The thought was that even though our intent was to live there until we sell it, there is always the possibility of moving out sooner, and eventually selling it fully tenanted with the highest rents we can get.

Hope this helps! Mathias.

 

[westboundventures]

Yes, do the analysis as if you were buying strictly for investment purposes and not to live there.

You may find that you would prefer not to live next to your tenants as Thomas has mentioned. You could always rent out the third unit and use that rent to go rent something equivalent for yourself to live in, and from strictly a cashflow perspective this would be the same.

QUOTE (ThomasBeyer @ Jul 6 2010, 09:02 PM) yes.

Consider also if you wish to live so close to tenants as you may have to evict them if they party or do drugs or frequently pay late .. and that is hard if you live close or get to know them well !!

 

[kboughen]

QUOTE (lightfoot @ Jul 5 2010, 09:11 PM) What is the industry standard for this type of analysis, so to speak?

When purchasing an owner occupied triplex, the Lender will qualify you based on the rent coming in from the other 2 units. This is also how future Lenders will treat this property if you purchase additional rental properties while living in the triplex. This exercise will also be useful in helping you understand how your monthly budget will change compared to renting now.


Evaluating the deal with all units rented is equally important as this will help you understand if the property will stand on its own as a pure rental property.

 

[GarthChapman]

If you live in one of the units you can buy at 5% down. And that`s the only way to buy a rental property in Canada with less than 20% down. If you are just starting out, I can`t think of a better way - except by buying a 4-plex (same rule applies).

 

[kboughen]

QUOTE (GarthChapman @ Jul 17 2010, 08:42 PM) If you live in one of the units you can buy at 5% down.
Hi Garth, I think you have a typo in your post, owner occupied 3-plexs and 4-plexs require 10% down. Singles and duplexes can be 5% down.

For those interested, full CMHC guidelines can be found at;

http://www.schl.ca/en/hoficlincl/moloin/ho...HC-Purchase.pdf

 

[GarthChapman]

QUOTE (kboughen @ Jul 18 2010, 10:48 AM) Hi Garth, I think you have a typo in your post, owner occupied 3-plexs and 4-plexs require 10% down. Singles and duplexes can be 5% down.

For those interested, full CMHC guidelines can be found at;

http://www.schl.ca/en/hoficlincl/moloin/ho...HC-Purchase.pdf

Right you are Ken...it is 10% down indeed.
Thanks,

 

[cycle33]

Right now in the Montreal area, price for small plex are to the roof, if you realy crunch the numbers i would be very suprise that you end up with positive cash flow even if you estimated that you rent your own appartment. But that says, the market for small plex is saling buildings counting that the owners will live in and have some taxes advantages. There maybe some deals to be made, but be very careful, at the moment the price for duplex, triplex and 4-plex around Montreal are mostly over estimated.

 

[housingrental]

cycle33: same storey in Waterloo!