After doing neighborhood and city research within Kitchener-Waterloo and applying the findings to the property analyzer (using the ACRE system and other sources) I can’t seem to wrap my head around how based on market rental rates in the area a property could possibly cash flow. Clearly I’m missing something especially since KWC seems to be one of the top places to invest in Ontario. I would greatly appreciate your critique of this analysis:Location: Waterloo
Conservative rental rate for a 3 bdrm: $1,000/month for a low to mid-end townhouse/semi with utilities not included.
Monthly Expenses:
Heat, Water, Hydro: $0.00 (paid by tenant)
Property Taxes: $180.67
Insurance: $100
Property Management: $100 (10% of gross rental income)
Vacancy Allowance: $68 (using 6.8% which is very conservative for the area)
Repairs & Maintenance: $80 (using 8% of gross rental income since property is 30-40 years old)
Lawn, Snow, Trash Removal: $0 (done by tenant)
Other: $20 (bookkeeping)
Net Operating Income: $451.33
Mortgage Expenses: Assuming a deal can be found for $160,000-$200,000.
Down payment (20%): $32,000
Mortgage Amount: $128,000
Even though a variable 5 year closed would be taken, we’re being conservative by using 5 year fixed rate to to ensure payments can be handled when rates jump.
Using RBC 5 year fixed with 35 amortization = 5.99%
This results in a monthly debt service payment of $722.69.
Net Cash Flow (monthly): -$271.36.
In total, expenses make up 55% of the gross rental income which seems a little high. Even if I stopped being conservative with rents and assumed $1200 instead of $1000 in monthly income, the cash flow position would still be negative.
I would greatly appreciate any time you could dedicate to tearing apart this analysis. Clearly with so many successful REIN and non-REIN investors, there must be something critical I’m missing in my understanding of property operations and acquisitions.
Many Thanks.
Kornel Szrejber (future REIN member)
[email protected]
Conservative rental rate for a 3 bdrm: $1,000/month for a low to mid-end townhouse/semi with utilities not included.
Monthly Expenses:
Heat, Water, Hydro: $0.00 (paid by tenant)
Property Taxes: $180.67
Insurance: $100
Property Management: $100 (10% of gross rental income)
Vacancy Allowance: $68 (using 6.8% which is very conservative for the area)
Repairs & Maintenance: $80 (using 8% of gross rental income since property is 30-40 years old)
Lawn, Snow, Trash Removal: $0 (done by tenant)
Other: $20 (bookkeeping)
Net Operating Income: $451.33
Mortgage Expenses: Assuming a deal can be found for $160,000-$200,000.
Down payment (20%): $32,000
Mortgage Amount: $128,000
Even though a variable 5 year closed would be taken, we’re being conservative by using 5 year fixed rate to to ensure payments can be handled when rates jump.
Using RBC 5 year fixed with 35 amortization = 5.99%
This results in a monthly debt service payment of $722.69.
Net Cash Flow (monthly): -$271.36.
In total, expenses make up 55% of the gross rental income which seems a little high. Even if I stopped being conservative with rents and assumed $1200 instead of $1000 in monthly income, the cash flow position would still be negative.
I would greatly appreciate any time you could dedicate to tearing apart this analysis. Clearly with so many successful REIN and non-REIN investors, there must be something critical I’m missing in my understanding of property operations and acquisitions.
Many Thanks.
Kornel Szrejber (future REIN member)
[email protected]