investing in North East Edmonton.

[blissedheart]

hi there,

I would be most grateful if anyone could help me with the economic fundamentals of investing in N.E Eddmonton Townhomes.

I have made several offers on townhomes around the 245,000 mark and i am wondering if these prices are too high.
i have listened to all the economic fundamentals however, when i run conservative five year estimates of an 8% return with a 20% downpayment amortised over 40 years, my returns on investment is 5% per annum.

The current rental for such a unit is $1300
the taxes are around 100 with condo fees of 170
with vacany allownaces, property management etc it seems like a shot in the dark invsting in these figures.

any suggestions
with thanks
blisedheart

 

[ChrisDavies]

With those numbers you`re grossing 6.4%, so it doesn`t make it through the funnel. They may cashflow with some tweaking though.

I use 8-10% for property management, 5% for maintence, and 3% for vacancy allowance. Put it all into the cashflow analyzer and see what you get.

 

[Thomas Beyer]

QUOTE (blissedheart @ Apr 5 2008, 01:59 PM) hi there,

I would be most grateful if anyone could help me with the economic fundamentals of investing in N.E Eddmonton Townhomes.

I have made several offers on townhomes around the 245,000 mark and i am wondering if these prices are too high.
i have listened to all the economic fundamentals however, when i run conservative five year estimates of an 8% return with a 20% downpayment amortised over 40 years, my returns on investment is 5% per annum.

The current rental for such a unit is $1300
the taxes are around 100 with condo fees of 170
with vacany allownaces, property management etc it seems like a shot in the dark invsting in these figures.

any suggestions
with thanks
blisedheart

8% annually .. or total ?

assuming no cash-flow .. just mortgage paydown, you net $20,000 on the mortgage paydown alone, a 44% ROI with 0 appreciation and 0 cash-flow for 5 years .. assuming 45K down and 200K mortgage. Not bad .. and you will learn to find markets with cash-flow and appreciation ... and that is certainly certain sections in NE or NE of Edmonton !

yes 240K for a TH sounds high .. bid lower / find a lower priced one under 200K .. if you haven`t tried at least 10 offers and failed 10 times .. you have not tried hard enough .. keep trying .. don`t get discouraged after one rejected offer !!

 

[nepoez]

QUOTE (thomasbeyer2000 @ Apr 5 2008, 06:23 PM) 8% annually .. or total ?

assuming no cash-flow .. just mortgage paydown, you net $20,000 on the mortgage paydown alone, a 44% ROI with 0 appreciation and 0 cash-flow for 5 years .. assuming 45K down and 200K mortgage. Not bad .. and you will learn to find markets with cash-flow and appreciation ... and that is certainly certain sections in NE or NE of Edmonton !

yes 240K for a TH sounds high .. bid lower / find a lower priced one under 200K .. if you haven`t tried at least 10 offers and failed 10 times .. you have not tried hard enough .. keep trying .. don`t get discouraged after one rejected offer !!

Wouldn`t it be 10k of mortgage paydown and even less if amortized over 40 years? by the way I`m just asking so I can learn if I`m calculating it wrong.

 

[Thomas Beyer]

QUOTE (nepoez @ Apr 6 2008, 03:38 PM) Wouldn`t it be 10k of mortgage paydown and even less if amortized over 40 years? by the way I`m just asking so I can learn if I`m calculating it wrong.

as a rule of thumb, with a 25 yr amortization you pay down 10% of the mortgage in 5 years ! this is what I used in my example of 0 cash-flow and - appreciation .. decent ROI even then !!!

cash-flow to HOLD is the key !

 

[nepoez]

QUOTE (thomasbeyer2000 @ Apr 6 2008, 07:19 PM) as a rule of thumb, with a 25 yr amortization you pay down 10% of the mortgage in 5 years ! this is what I used in my example of 0 cash-flow and - appreciation .. decent ROI even then !!!

cash-flow to HOLD is the key !

I see.. yup 25 year amort would indeed be a $20k+ paydown in 5 years.. But too bad the rent is way too low to cash flow this property.

 

[Thomas Beyer]

QUOTE (nepoez @ Apr 7 2008, 01:01 PM) I see.. yup 25 year amort would indeed be a $20k+ paydown in 5 years.. But too bad the rent is way too low to cash flow this property.

or: the price is too high !

 

[nepoez]

QUOTE (thomasbeyer2000 @ Apr 7 2008, 10:07 PM) or: the price is too high !

That`s true! I`m brand new at this so I`ve come up with a spreadsheet that will help me know immediately if the property is worth buying according to the numbers(I think, haven`t tried in real life yet). It will let me know the cashflow, total investment, real gain after realtor fees and all but excludes income tax, and then ROI. But what it won`t tell me is what the vacancy rate is of course. So that`s still a missing factor, and an important one at that. What`s the best way to research for vacancy rate and rental price for a property that hasn`t been rented out before. Or even one that has?

 

[blissedheart]

hi there,
thankyou all for all the input into this question.

i did withdraw from the deal from all the advise i did receive.

the deal would cash flow at -100/ month for a year, this was with 25% down and 40 year amoratization.

i will have to begin all over again and find something cheaper.
with thanks
again.
blissedheart.

 

[stepchuk]

You may also want to look at the rent potential for your NE townhomes. We are currently renting ours for around $1500, not $1300. This would be for a typical 3 bedroom townhome in good condition, 1.5 bath, full yet unfinished basement. I do believe that $1300 may be a little low in the current market.

 

[Thomas Beyer]

QUOTE (stepchuk @ Apr 19 2008, 08:35 AM) You may also want to look at the rent potential for your NE townhomes. We are currently renting ours for around $1500, not $1300. This would be for a typical 3 bedroom townhome in good condition, 1.5 bath, full yet unfinished basement. I do believe that $1300 may be a little low in the current market.

depends on the area .. I`d call $1500 high ..

 

[ChrisDavies]

QUOTE (stepchuk @ Apr 19 2008, 07:35 AM) You may also want to look at the rent potential for your NE townhomes. We are currently renting ours for around $1500, not $1300. This would be for a typical 3 bedroom townhome in good condition, 1.5 bath, full yet unfinished basement. I do believe that $1300 may be a little low in the current market.

You`re only going to get that with a nice unit and a good property manager.