Hello everyone,
We are currently negotiating directly with the owner (private sale) to buy a mixed use (1 1/2 storey residential house zoned for re-development) 4beds-3baths rental property in one of the top cities to invest in Ontario. It is in great location with huge potential knowing and observing the area. At present, the property is being used as a single family residence and rented out to one family for one year.
Below are the financials:
Asking price - $290K
Purchase price (under re-negotiation) - $260K
VTB (under re-negotiation) - 15% at 6% interest rate for 1 year (balloon)
Appraised value - $255K
After repair value - $300K+
Estimated repair costs as per home inspection - $25K (price reduction still under negotiation)
1st Year Financial data :
Current Rental income = $18,000 plus utilities (if we keep the current tenants)
Less: Cash disbursements (Property taxes, Insurance, Vacancy allowance (5%) Repairs & maintenance allowance (5%) Property management (10%), Mortgage payment (P+I), Interest on VTB) = $20,790
Negative Cash flow - $(2,790)
What we plan to do:
1 - ask the seller for vacant possession
2 - do cosmetic renovations
3 - refinance it (if viable)
4 - increase the rent to $1,875/mo plus utilities, or
5 - convert the house into commercial (main floor) and residential units (2nd floor & basement)(per zoning this is allowed)
6 - refinance it
7 - estimated rental income is $2,500 minimum
Aside from the above plans, would you plan to do differently? What would you do or not do? Would you still pursue the deal? Any expert opinion in this case? Much appreciated.
REInvestors88
We are currently negotiating directly with the owner (private sale) to buy a mixed use (1 1/2 storey residential house zoned for re-development) 4beds-3baths rental property in one of the top cities to invest in Ontario. It is in great location with huge potential knowing and observing the area. At present, the property is being used as a single family residence and rented out to one family for one year.
Below are the financials:
Asking price - $290K
Purchase price (under re-negotiation) - $260K
VTB (under re-negotiation) - 15% at 6% interest rate for 1 year (balloon)
Appraised value - $255K
After repair value - $300K+
Estimated repair costs as per home inspection - $25K (price reduction still under negotiation)
1st Year Financial data :
Current Rental income = $18,000 plus utilities (if we keep the current tenants)
Less: Cash disbursements (Property taxes, Insurance, Vacancy allowance (5%) Repairs & maintenance allowance (5%) Property management (10%), Mortgage payment (P+I), Interest on VTB) = $20,790
Negative Cash flow - $(2,790)
What we plan to do:
1 - ask the seller for vacant possession
2 - do cosmetic renovations
3 - refinance it (if viable)
4 - increase the rent to $1,875/mo plus utilities, or
5 - convert the house into commercial (main floor) and residential units (2nd floor & basement)(per zoning this is allowed)
6 - refinance it
7 - estimated rental income is $2,500 minimum
Aside from the above plans, would you plan to do differently? What would you do or not do? Would you still pursue the deal? Any expert opinion in this case? Much appreciated.
REInvestors88