Property Analysis... Have I missed anything!?!?!?

[Ken15]

I have an opportunity to build an 8-Plex in Kitchener, ON. It is located in a very nice area of town. I am a builder so I`m very confident on my building costs but not so
confident on my assumed rental expenses.

Have I missed anything???

Is this worth proceeding or not!?!?!?!

Your comments and suggestions would be greatly appreciated!

Land and Building cost $929,725.00

6 X 2 Bdrm Units @ ~$975.00/mnth
2 X 1 Bdrm Units @ ~$775.00/mnth
Downpayment 20.00% = $185,945.00
Financing Amount = $743,780.00
# of Rental Units = 8
Rental Income ~$88,800.00/yr
Laundry Income ~$2,400.00/yr
Repair & Maintenance @ $650.00/suite/year ~$3,552.00/yr
Management Fees 8% ~$7,104.00/yr
Vacancy 5.00% of Rental Income ~$4,440.00/yr
Insurance 0.40% Purchase Price ~$2,600.00/yr
Property Taxes 1.25% of Purchase Price ~$11,562.50/yr
Mortgage@ 5.50% for 30 Years $50,677.20/yr
Common Area Utilities ~$2,400.00/yr

Total Expenses ~$82,335.70/yr

Total Income ~$91,200.00/yr

Difference $8,864.30/yr

Cashflow / Door $92.34

 

[Thomas Beyer]

expenses sound about right (missing is advertising and accounting)

Utilities depend on type of heating .. are they sub-metered for both heat and warm water ??

Rents seem LOW for brand new units .. are they very small ?

 

[Ken15]

QUOTE (thomasbeyer2000 @ Mar 19 2009, 08:10 PM) expenses sound about right (missing is advertising and accounting)

Utilities depend on type of heating .. are they sub-metered for both heat and warm water ??

Rents seem LOW for brand new units .. are they very small ?

Advertising will be mostly on Kijiji.ca.... works very well in this area.

Accounting???? Not Sure

Each unit will be individually heated with gas furnances and gas waterheaters.

I tried to be very conservative with all of my numbers including my rents. I probably could get more for brand new units. They are not small. All of them include kitchens, dining areas, living rooms and nice sized bedrooms.

Ken

 

[Marek2086]

I agree the rent prices could go up $50-$100/door the insurance cost i think could be twice that amount. and snow removal I found costs more than you may think. How long would it take to build? How long will you have your money tied up for before you can start renting? How much are current 8-plexs in the area? Is it cheaper to buy?

 

[housingrental]

Ken15:
Rent might be OK or off depending on area / size / quality
Don`t like the 110+k / door price point
Why not pickup older low rise buildings occasionally available for <70k /door and use your skills to renovate and modernize ?
Or pickup student housing lot ?

 

[Thomas Beyer]

QUOTE (housingrental @ Mar 20 2009, 12:08 PM) Don`t like the 110+k / door price point
Why not pickup older low rise buildings occasionally available for <70k /door and use your skills to renovate and modernize ?
why not .. 110/door for BRAND NEW is great .. better than 70/door + upgrades of 30/door to bring to like new status !!

 

[Ken15]

QUOTE (housingrental @ Mar 20 2009, 12:08 PM) Ken15:
Rent might be OK or off depending on area / size / quality
Don`t like the 110+k / door price point
Why not pickup older low rise buildings occasionally available for <70k /door and use your skills to renovate and modernize ?
Or pickup student housing lot ?

I`m a huge fan of new construction. It`s my living!! I have a bunch of townhome rentals that I build and rent. My oldest is about 5 years old now with the original tenants still. I have never been called to do any repairs at any of my rentals yet! I have the control of what materials are used and who installs them.

I have done renovations and I have seen renovations bring contractors to "their knees"...myself included. There are sooooo many unknowns in renovations. asbestos, structural issues, lead, mold, formaldehyde, knob and tube, aluminum wiring, etc... A never ending surprise!!!

My biggest concern is that I`m so biased to new construction that I might have skewed my numbers to make it more appealing to myself. Again.... the building/construction numbers I`m confident with it`s all my other assumptions that concern me.

Thanks,
Ken

 

[Thomas Beyer]

QUOTE (Ken15 @ Mar 21 2009, 04:31 AM) I`m a huge fan of new construction. It`s my living!! I have a bunch of townhome rentals that I build and rent. My oldest is about 5 years old now with the original tenants still. I have never been called to do any repairs at any of my rentals yet! I have the control of what materials are used and who installs them.

I have done renovations and I have seen renovations bring contractors to "their knees"...myself included. There are sooooo many unknowns in renovations. asbestos, structural issues, lead, mold, formaldehyde, knob and tube, aluminum wiring, etc... A never ending surprise!!!

My biggest concern is that I`m so biased to new construction that I might have skewed my numbers to make it more appealing to myself. Again.... the building/construction numbers I`m confident with it`s all my other assumptions that concern me.

Thanks,
Ken
congratulations .. you found a niche .. stick with it !

How about financing ? How much cash is required and what kind of mortgage can you get these days ? Banks used to finance 75% of cost at prime or prime + 1 .. but these days ?

 

[housingrental]

Because - often like 65k/door + 5-15k/door reno for better location / easier rent / higher rent

QUOTE (thomasbeyer2000 @ Mar 20 2009, 06:47 PM) why not .. 110/door for BRAND NEW is great .. better than 70/door + upgrades of 30/door to bring to like new status !!

 

[housingrental]

New construction - For sure much easier to deal with

Renovations - For sure ... but I`m thinking more along the lines of needs flooring / paint / lighting / cabinets type of reno not a major project...

Your deal - A potential 115k / suite - with possibility of it going to 120+k/suite doesn`t seem to appealing... and I`m assuming this is in suburbs not a redevelopment of a lot at King and Union ... so why be in for a big premium vs comparable product in better location / easier to rent / higher rent / the can be cleaned up with ease ?

Why not a new student 5 x 4 = 20 beds = $10 000 / rent / month = Higher rent and greater stability of revenue stream for slightly more cash in or for less cash 5 x 3 = 15 bed project that will get you to similar rent for less in?



QUOTE (Ken15 @ Mar 21 2009, 05:31 AM) I`m a huge fan of new construction. It`s my living!! I have a bunch of townhome rentals that I build and rent. My oldest is about 5 years old now with the original tenants still. I have never been called to do any repairs at any of my rentals yet! I have the control of what materials are used and who installs them.

I have done renovations and I have seen renovations bring contractors to "their knees"...myself included. There are sooooo many unknowns in renovations. asbestos, structural issues, lead, mold, formaldehyde, knob and tube, aluminum wiring, etc... A never ending surprise!!!

My biggest concern is that I`m so biased to new construction that I might have skewed my numbers to make it more appealing to myself. Again.... the building/construction numbers I`m confident with it`s all my other assumptions that concern me.

Thanks,
Ken

 

[Ken15]

QUOTE (housingrental @ Mar 21 2009, 10:54 AM) Why not a new student 5 x 4 = 20 beds = $10 000 / rent / month = Higher rent and greater stability of revenue stream for slightly more cash in or for less cash 5 x 3 = 15 bed project that will get you to similar rent for less in?


I`m sure there are 1000`s of better opportunities out there and I`m sure there are 1000`s of worst ones. This project fits my needs from a construction standpoint and stands to make money for me as well. I have employees and sub trades that are hungry for work and this is an opportunity keep people working but I want to make sure the numbers work as well. I`m not looking for a "make work project!"

I`d prefer opinions on my assumed expenses, etc... Do they make sense?? Are they reasonable??

Thanks,
Ken

 

[housingrental]

Sure Ken not trying to badger you but can you make money at that price per door on resale for that size of building ?
Where`s this going to be at?
My thoughts on expenses:
Seem somewhat reasonable for a new building - You need to factor in common area and change over cleaning, landscaping / snow clearing / salting / advertising / - not sure if you included any of this in management and RM (?) ?