I am looking for some advice/feedback on the following property:
This is a pre-construction three floor detached house with a detached two car garage and a coachhouse suite above the garage. I have no intentions of living in the house so there are potentially three rental units here: coach house, basementsuite and main/top floor. Each unit will have their own laundry and kitchen facilities.
I know that the two adjacent units are also being purchased for complete rental purposes.
Here are some numbers:
purchase price $600000 including GST
monthly mortgage payment at 4.2% fixed = $2715.89
monthly mortgage payment at prime + .25 = 2140.82
monthly expenses:
property taxes = $250 ($3000/year)
insurance = $100
vacancy rate @ 5% = $150
maintenance/repairs = 50 (not sure how much to allocate b/c it is brand new)
total expense (not including mortgage payment) = $550
estimated total monthly rent = $3000 (based upon local newspaper ads and realtor advice--will do my own test ads later)
so, if we go with the fixed rate then monthly expenses = $3265.89
which = negative cash flow of $265.89/month
if we go with the variable rate then monthly expenses = $2690.82
which = postive cash flow of $309.18
I see a decent upside in terms of potential equity gain b/c it is new. My concern is that in BC we can only raise rents approx. 4%/year (which is only $34 on $850).
The rents are conservative but would rather do that than over predict.
So, is this a good deal??
The cash flow is ok but the bigger question may be equity gain. What about mortgage rates in 5 years when the principal amount will still be quite high?
Please, any thoughts/advice would be greatly appreciated!!
Ian
This is a pre-construction three floor detached house with a detached two car garage and a coachhouse suite above the garage. I have no intentions of living in the house so there are potentially three rental units here: coach house, basementsuite and main/top floor. Each unit will have their own laundry and kitchen facilities.
I know that the two adjacent units are also being purchased for complete rental purposes.
Here are some numbers:
purchase price $600000 including GST
monthly mortgage payment at 4.2% fixed = $2715.89
monthly mortgage payment at prime + .25 = 2140.82
monthly expenses:
property taxes = $250 ($3000/year)
insurance = $100
vacancy rate @ 5% = $150
maintenance/repairs = 50 (not sure how much to allocate b/c it is brand new)
total expense (not including mortgage payment) = $550
estimated total monthly rent = $3000 (based upon local newspaper ads and realtor advice--will do my own test ads later)
so, if we go with the fixed rate then monthly expenses = $3265.89
which = negative cash flow of $265.89/month
if we go with the variable rate then monthly expenses = $2690.82
which = postive cash flow of $309.18
I see a decent upside in terms of potential equity gain b/c it is new. My concern is that in BC we can only raise rents approx. 4%/year (which is only $34 on $850).
The rents are conservative but would rather do that than over predict.
So, is this a good deal??
The cash flow is ok but the bigger question may be equity gain. What about mortgage rates in 5 years when the principal amount will still be quite high?
Please, any thoughts/advice would be greatly appreciated!!
Ian