- Joined
- Apr 22, 2015
- Messages
- 30
Hi everyone,
I've been looking at income properties (mostly duplexes or triplexes, but some single family homes as well) in my hometown in southern Ontario (pop: 70,000). Most of the properties that have been on the market over the last year are priced around $100-150K. At first glance, these prices seem very reasonable compared to larger markets, but rents are also low by comparison. Very few properties I've looked at over the last year seem to cash flow unless the asking price is reduced by 30 or 40 per cent. I've also seen a few properties that have sold at prices that don't make sense to me at all. So I'm starting to wonder if my math is wrong or if my expectations for cash flow are unrealistic.
Here's an example of one of the nicer duplexes currently on the market. The asking price is $153K, but it only makes sense to me if the price is about $100K. At that price there would be a cash flow of about $100/door, which I've often heard is the target most investors are aiming for. Does this seem reasonable based on the numbers below? There is a long-term tenant on the main floor paying less than market value, but I also think the estimate of the vacant second floor rent may be high. So I think any increase to the total monthly rent may be difficult to achieve and might be modest at best.
Asking Price: $153,000
Down Payment: $30,600 (20%)
Closing Costs: $3000
Income Unit 1: $650 all inclusive (Long term tenant. Rent has not been raised in "a few years".)
Income Unit 2: $800 + hydro (Currently vacant. Rent based on previous tenant and it seems high to me.)
Total Monthly Income: $1,450
Taxes, Utilities, Insurance: $435.25 (Annual expenses reported by listing agent $5223. I suspect they may be underestimating.)
6% Vacancy: $87
5% Repairs: $72.50
7% Capital Expenditures: $101.50
8% Property Management: $116
Total Monthly Expenses: $812.25 (plus legal, accounting, advertising, etc)
Net Operating Income: $637.75
Yield or Cap Rate: 5% (Annual NOI/Property Value)
Mortgage Payment: $643.85 (20% down, 4%, 25yrs)
Monthly Cashflow / Net Profit: -$6.10
I'd appreciate any feedback on my calculations for this property.
Thanks very much,
Andy
I've been looking at income properties (mostly duplexes or triplexes, but some single family homes as well) in my hometown in southern Ontario (pop: 70,000). Most of the properties that have been on the market over the last year are priced around $100-150K. At first glance, these prices seem very reasonable compared to larger markets, but rents are also low by comparison. Very few properties I've looked at over the last year seem to cash flow unless the asking price is reduced by 30 or 40 per cent. I've also seen a few properties that have sold at prices that don't make sense to me at all. So I'm starting to wonder if my math is wrong or if my expectations for cash flow are unrealistic.
Here's an example of one of the nicer duplexes currently on the market. The asking price is $153K, but it only makes sense to me if the price is about $100K. At that price there would be a cash flow of about $100/door, which I've often heard is the target most investors are aiming for. Does this seem reasonable based on the numbers below? There is a long-term tenant on the main floor paying less than market value, but I also think the estimate of the vacant second floor rent may be high. So I think any increase to the total monthly rent may be difficult to achieve and might be modest at best.
Asking Price: $153,000
Down Payment: $30,600 (20%)
Closing Costs: $3000
Income Unit 1: $650 all inclusive (Long term tenant. Rent has not been raised in "a few years".)
Income Unit 2: $800 + hydro (Currently vacant. Rent based on previous tenant and it seems high to me.)
Total Monthly Income: $1,450
Taxes, Utilities, Insurance: $435.25 (Annual expenses reported by listing agent $5223. I suspect they may be underestimating.)
6% Vacancy: $87
5% Repairs: $72.50
7% Capital Expenditures: $101.50
8% Property Management: $116
Total Monthly Expenses: $812.25 (plus legal, accounting, advertising, etc)
Net Operating Income: $637.75
Yield or Cap Rate: 5% (Annual NOI/Property Value)
Mortgage Payment: $643.85 (20% down, 4%, 25yrs)
Monthly Cashflow / Net Profit: -$6.10
I'd appreciate any feedback on my calculations for this property.
Thanks very much,
Andy
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