Is this a Good Deal?

[marilyn]

I need some advice from seasoned investors :
Please give me your opinion on this option.

11 plex - 1 bedroom - excellent Ont town
Price 850,000
Income 87,400
Expenses
Heat - 8500
Taxes - 13,700
Insurance 2100
Snow/Yard 2000
Hydro paid by tenants
vacancy rate 3 % 2622
Mng 12% 10488

I think its a good deal.
Also, where should I look for best mortgage CHMC? I will contact all major banks, but are there other options as well?
Also, is REMA available for all rein members and where can I find it. ( I can`t find it on this site)
Because this is considered commercial will I have to put 35% down instead of 25%
Sorry for all these basic questions but I`m a newbie
Thanks.
Marilyn

 

[lanedry77]

Hi Marilyn,

You can download a demo of REMA at http://www.remacanada.ca/. It`s not free for REIN members, but it`s much cheaper for REIN members.

CMHC will let you put down 15% of their assessed value for the property, keeping in mind this might be less than you pay.


I would also suggest using a mortgage broker instead of going to the banks directly. It`s no cost to you, and a good broker can find you the best mortgage for your goals and portfolio.


David.

 

[kboughen]

QUOTE (marilyn @ Jul 5 2009, 12:43 PM) will I have to put 35% down instead of 25%
Hi Marilyn,


As David mentioned, for Multi Unit Residential, CMHC will let you put down as little as 15% of the Lending Value CMHC attributes to the subject property, the down payment percentage is not calculated based on the purchase price. Here a link to CMHC`s Multi Unit Reference Guide. The checklists at the end of the Guide help you understand all the documents you will need to gather for the CMHC application.


http://www.cmhc-schl.gc.ca/en/hoficlincl/m...-2009_63885.pdf

The actual down payment you will need and the interest rate you will be offered are dependant upon CMHC and the Lenders evaluation of the subject property and to some extent the borrower`s details.

 

[housingrental]

This deal offers a poor return, and will likely result in you losing money from operations on an ongoing basis. All one bedroom suites isn`t a desirable suite mix. I`m assuming your management fee includes super fee that`ll do garbage / cleaning ?

 

[invst4profit]

I agree.

Price to income ratio is too high. You will have negative cash flow and no return on your down payment based on the little info you have provided.
Do you have any indication as to the present owners annual maintenance expenses? Has maintenance been neglected?

 

[Thomas Beyer]

It is an OK deal at best .. using $3500/suite/year in expenses I arrive at expenses of $38,500/year .. or an NOI of 87400-38500 = 40K more or less per year .. or about a 5% CAP rate .. which is way too low for Ontario unless rents can be raised or the suites are in superb conditions (are they?)

The price of 70-80/door is OK for a larger city but too high for a small town.

Using a DCR of 1.3 and a CAP rate of 8-9% you will likely get a 60% mortgage with CMHC at best .. or 50% with a conventional lender.

Write an offer @ 60/door with a VTB and see where it goes ..

Ontario is OK with 20% down .. but with 40% down and rent control: a way to ruin your real estate career as no re-finance can be obtained like in SK or AB !

We bought a 93 suiter in Sudbury, Ontario last year for 42/door .. which was an OK purchase with a sub 4.8% CMHC mortgage and decent cash-flow from the get go .. so try to stay well below 60/door for smaller towns unless in pristine condition or large suites .. or perhaps 80-100/door if sustainable rents are well above $1000/suite/month from the start !

 

[Nir]

QUOTE (thomasbeyer2000 @ Jul 6 2009, 08:02 PM) Ontario is OK with 20% down .. but with 40% down and rent control: a way to ruin your real estate career
Unless she can somehow refinance after a year or so and take half of that 40% out. right?
(BTW I agree it`s a bad deal, just a question on this comment)