Good Purchase or Not

[Mvarga]

I`m looking for my first purchase just wanted to run some numbers by and see if i`m missing anything or if this seems like a good deal. The property is in waterloo walking distance to both universities. It is an older building but from first apperances looks to be maintained nicely. Currently with 4 bedrooms looking to rent for $480 each inclusive. Thanks for any input.

Purchase price 210,000 with 20,000 down payment
Monthly rent 1920
Mortgage 4.5% 35 year 875$/month
Property tax $200/month
Utilities $300/month
Insurance 70$/month
Property Management 180/month
Vacancy 90$/month
Repairs maintenance 140/month

Even with taken into consideration a future interest of 4.5% it was cash flowing around $70 a month. however with todays rates it was around 150$ a month.

 

[invst4profit]

This in my opinion is not a good deal.
The first obvious reason is the very poor cash flow. Approximately $90/month of that is not even generated from the property it is from your cash investment.
In addition the utilities included is always bad but especially so with young tenants in an old building.
The fact that it is students and an old building also means higher repair expenses.
Has the present LL neglected maintenance that you will have to do. How old is the roof, heating system, windows. These are all major costs and contribute to the utilities expenses.
Does the $210,000 include all closing costs?

Here is how I see this deal:

Expenses: $1920 - $960 = $960/month (50%)
Mortgage: $988 (100% financing @4.5% to include return on down payment)

Cash Flow $960 - $988 = $28/month negative cash flow.

To be honest even if you could achieve $150/month positive cash flow, which is unlikely this would still be a poor return considering the risk and amount of effort to maintain.
Considering the cost of just a new roof your cash flow would be wiped out for at least 3-4 years maybe longer.
In addition, appreciation being based on income, I believe the past few years have pushed student incomes to the limit and rents will be stagnant for some time directly influencing that appreciation.

My guess is you will likely sell after a few years of hard work, negative cash flow and sleepless nights only to lose money due to real estate fees. You will however be thankful it is finally over.

This is only my opinion of course.

 

[JulieHoffman]

I like the looks of this property. Mainly for the proximity to University. Remember to make sure that the students rent it all year and sublease in the summer to avoid headache for you. That`s what I did when I was in University.

Your maintenance might be higher if it is quite an old building. But if you position yourself right, you should have no problem with University Students and less risk of vacancy.

You might want to offer the option of increasing the rent during the school year and if they want to leave it over the summer (as long as you are covered by the increase) then they can reserve their room.

Isn`t there a REIN student housing expert? I would talk to him.

Best of luck! This is so exciting! I hope you get your first property soon.

 

[housingrental]

I`d like to consider myself a REIN student housing expert

QUOTE (JulieHoffman @ Jun 10 2009, 04:10 PM) I like the looks of this property. Mainly for the proximity to University. Remember to make sure that the students rent it all year and sublease in the summer to avoid headache for you. That`s what I did when I was in University.

Your maintenance might be higher if it is quite an old building. But if you position yourself right, you should have no problem with University Students and less risk of vacancy.

You might want to offer the option of increasing the rent during the school year and if they want to leave it over the summer (as long as you are covered by the increase) then they can reserve their room.

Isn`t there a REIN student housing expert? I would talk to him.

Best of luck! This is so exciting! I hope you get your first property soon.

 

[housingrental]

HI Mvarga,
I have lots of student rentals in Waterloo
Are you sure you can get financing with only 9.5% down payment on a student rental?
If its a good property your vacancy will likely be $0
Which property is this?
I`d be somewhat concerned based on your description of walking distance to both universities... you`ll NOT find a four bedroom walking distance to both universities at 210k in livable condition... even ones that are non investment properties sell for higher than that to parent purchasers between both schools.
Are you wanting to buy on A-243 Cedarbrae?
Give me an email with info.

QUOTE (Mvarga @ Jun 8 2009, 09:32 PM) I`m looking for my first purchase just wanted to run some numbers by and see if i`m missing anything or if this seems like a good deal. The property is in waterloo walking distance to both universities. It is an older building but from first apperances looks to be maintained nicely. Currently with 4 bedrooms looking to rent for $480 each inclusive. Thanks for any input.

Purchase price 210,000 with 20,000 down payment
Monthly rent 1920
Mortgage 4.5% 35 year 875$/month
Property tax $200/month
Utilities $300/month
Insurance 70$/month
Property Management 180/month
Vacancy 90$/month
Repairs maintenance 140/month

Even with taken into consideration a future interest of 4.5% it was cash flowing around $70 a month. however with todays rates it was around 150$ a month.