Rate my probable property

[moneyismyservant]

3 bedroom twnhouse
Purchase price $175,000 (we refi`ed our current home and used partial of the funds for 5% down on this home)
3 years new with 4 years remaining home warranty

rent is $1300 pre month plus they pay utilities

Mortgage is $826 per month
Taxes $1700 in the mort.
Ins is $440

We expect $280-$300 cash flow monthly

in a mid class community but on a street with all rental apartments and duplex`s

curb appeal for this particular unit is nice, but for resale we believe the street does not carry the unit well.

The price is excellent for being so new and not having to do windows/roofs for 10+ yrs to come. Most single family homes on a desirable street this price range are needing $10,000-20,000 of maintenance.

Located in Halifax

What`s your opinion, all is much appreciated!

 

[invst4profit]

Not really enough details regarding mortgage, taxes, insurance, etc.
Rent to price somewhat low...

 

[GORDandJULIE]

You don`t mention anything about monthly maintenance fees. Is this property a freehold?

Gord

 

[moneyismyservant]

QUOTE (GORDandJULIE @ Jul 23 2009, 06:35 PM) You don`t mention anything about monthly maintenance fees. Is this property a freehold?

Gord


Freehold ....yes it is

 

[MacGraham]

This sounds like a strong deal to me. Cash flow is great although I would set aside some money for vacancy. Being the home is under warranty you shouldn`t have to worry much about maintenance. Because it is a new home, do you have a paved driveway, finished basement or fence? These are the sort of things that don`t come with new homes which can be quite costly and provide little to no resale value in my opinion (People buy a house and expect that a driveway and fence will just be there).
As for Resale value and appreciation, I think of that stuff like gravy, Mortgage Principal Paydown and Cashflow are the meat and potatoes. Besides, if you own an asset that pays your mortgage and puts $300 in your pocket every month, why would you want to sell? Refinance and buy another.

Mac Graham
General Manager
Top-Notch Properties
Kitchener ON


QUOTE (moneyismyservant @ Jul 23 2009, 09:07 AM) 3 bedroom twnhouse
Purchase price $175,000 (we refi`ed our current home and used partial of the funds for 5% down on this home)
3 years new with 4 years remaining home warranty

rent is $1300 pre month plus they pay utilities

Mortgage is $826 per month
Taxes $1700 in the mort.
Ins is $440

We expect $280-$300 cash flow monthly

in a mid class community but on a street with all rental apartments and duplex`s

curb appeal for this particular unit is nice, but for resale we believe the street does not carry the unit well.

The price is excellent for being so new and not having to do windows/roofs for 10+ yrs to come. Most single family homes on a desirable street this price range are needing $10,000-20,000 of maintenance.

Located in Halifax

What`s your opinion, all is much appreciated!

 

[invst4profit]

On the surface, based on your numbers, it`s a great deal.
However in the real world this business has more expenses than taxes and insurance. These additional real expenses, interest rate increases and hidden costs of being in this business will cut deeply into your cash flow.
Initially you will see positive cash flow but contrary to the normally expected growth in flow yours will diminish.
Higher expenses combined with higher interest rates will push this property into negative cash flow within 5 years time. At the same time the personal demand on your time to manage the property will increase.
Your options will be to sell or artificially correct this financial bleed by paying down the mortgage.

My advice would be for you to concentrate on building up a substantial reserve fund not only for repairs but also to use to pay down the mortgage if you plan on holding this property long term.
Don`t spend your profits as you may not actually have any until you sell.

 

[NorthernAlex]

Even if you manage it by your own you should a management fee. So, if you need later on a mgmt., you already priced it in. Don`t forget a potential vacancy rate. Do you rent a full kitchen with it? What, if stove/fridge go out of order?

Even if it is hard and tempting, but I would keep the profit in the bank the first year and after 12 months pay out 50% and after that quarterly the income. So you will always have a reserve fund.