Buy or not to buy NEED YOUR HELP REIN COMMUNITY !!

[Dietz87]

Hi Rein Community



My wife and I are looking at purchasing our second property in Killarney neighbourhood in Edmonton . Its a suited house with a legalized suite below. House is completely renovated.



Purchase price is $424,000

Total Revenue $3575

Total cash flow $630 a month with consertative numbers



Rent for upper flow $1500 a month plus $300 flat rate for utilities

Rent for legalize suite $1275 a month plus $300 flat rate for utilities

Double Car Garage $200 a month



ROI is 30% first year with principal reduction, mortgage reduction, and cash flow



I have found the purchase price to be on the higher side but everything is brand new in the home windows, 2 furnaces, 2 brand new kitchens, brand new flooring, tons of curb apeal.



Pretty much stuck in analysis proalysis right now. What are your thoughts?



Thank you



A

 

[JBagorio]

The purchase price seem a bit high! Without truly knowing the location very well and how many number bedroom in each door it is hard to tell if your rent projection is accurate. Base on the info you provided so far, my advice is to be very realistic on your numbers. I would rather be conservative and do a thorough rental analysis on the area.

 

[Thomas Beyer]

Rent seems a tad high for lower suite, assuming two BR of around 900 sq ft. More details on sq ft please, up and down, garage size, yard size, comparables in the area, but if rents are achievable then it seems a very worthwhile project.

 

[bizaro86]

I don't know the Edmonton rental market, but the 1275 for the lower seems high for something where the upper is only getting 1500. Are you taking the current rents at face value? I would make sure those are realistic rents for a re-rental. Just in case the current basement tenants are the seller's buddies who are going to move out in 2 months or something.



If you're confident in the rents I'd say its probably not a bad deal. My only question is what your goals are, and is this going to get you closer to meeting them? I don't see much opportunity to make physical/operating improvements to drive up the value of this propery, so if capital gains are your goal you could probably do better. If its just to get a cashflow property this might be a good choice.



Look at your belize. Would buying this put you closer to it or further away?

 

[Dietz87]

Hi Thomas



The upstaite is 1000 sq feet.The lower suite is a 3 bedroom suite and is 1000 sq feet. Garage size is a double car garage with 2 doors.



Thanks A

 

[Dietz87]

The owner of this property is quite known in the Rein community and this is a flip property for him. It would be managed by him. What is apealling in this property is the house is completely renovated top to bottom so very little repairs for the next 5-10 years other then managing the tenant relationships. Only issue I have like I said is I think the purchase price is a little high but what I am getting is a property solid. There is value there I just dont know if that value is worth 424,000

 

[LAndersen]

Going by the numbers and not knowing the area, it seems like a no brainier to go ahead. That being said, what are some market com parables in terms of rent and purchase price?

 

[JBagorio]

Based on the $424,000 purchase price, you will need to get about $1400 rent per door to be at the 8% cash flow zone. If you think you can truly ren it for that amount (based on an unbiased rental analysis) then it is no questions ask, buy it!! .... I would, as long as the number works!!!

 

[invst4profit]

If the cash flow numbers are accurate it doesn't look on the surface too bad. Problem is that estimates on cash flow based on the next ten years expenses is very difficult to determine. Especially predicting tenant behavior.

Mortgage pay down is of little value until you sell and being unable to predict future markets this is not a consideration for me when valuing a property. Cash flow is your primary consideration.

My issue would be the utilities charges. I don't purchase properties that the tenants do not have utilities in their own name. Too risky.



As far as the price is concerned if you think it's too high you simply offer less and walk away if you don't get your number. It is a business transaction that only needs to work for you otherwise move on to the next one.

 

[AminMurji]

What are the comparables in that area? It may be on the high side. Also the rent projections seems high. Check kijiji or padmapper to get a sense of the rents in that area.

 

[bizaro86]

Personally, I would rather partner with someone doing the reno than buy a flip. It's better if the person making the decisions on whether to cut a corner or not has a long term stake in the property. Maybe this seller has so much integrity that you implicitly trust them not to do that, but it's something I'd consider.



I would definitely look at other similar houses, and estimate how much it would cost you to renovate one. Then figure out how much you're willing to pay for someone else to do it for you so it's turn key. Add the three numbers together and you have something to compare to your 424k.



Michael

 

[MonicaPaslawski]

I would be interested to know some of the details about the area - demographics, tenant profile, transportation, etc . . .