Practice rental property analysis - Windsor, Ontario

[Micah Ng]

Hey all, 

I'm relatively new to BP and real estate in general, and I've starting to learn how to analyse rental properties for when I am ready later on. As a first year in university I'm definitely not buying any property anytime soon, but I would like some feedback so that I can get it right when I finally do.

I used a REI property Analyzer excel spreadsheet that I found on a forum post.

Property Info:

Address: 1009 Hickory Rd, Windsor, Ontario 

Note: This property is located in East Windsor, which is a better part of town.

Property type: Triplex - 2 upper units, one bedroom each. 1 Lower unit with three bedrooms.

Costs: 

Asking price: $249,000 CAD

Assuming $10,000 CAD for closing costs, taxes, appraisals

Mortgage: 20% Down, 30 Year amortization @ 4%

Total initial investment: $59,800

Calculated NOI:

Listing data claims the property is earning $2800/mo in rental income; CMHC rental reports suggest the average rental income for 2x 1 bedroom units and 1x 3 bedroom units will bring in closer to $2500. This is the figure I will use in my calculation.

$30,000 in annual rental income + utilities are paid for

less $600 for the average ~3% vacancy rate (2.7% according to CMHC)

less $2000 for property taxes ($1867.90 according to City of Windsor, effective 2018 Jan 1)

less $1000 for insurance  ( Assumed figure. Average in Ontario is $780)

less $3000 for property management

less $4,500 for Repairs + CapEx ( 5% for repairs, 10% for CapEx)

Leaving $18900 at the end of the year

Calculated Cash Flow

 $18900/Year

Less  $11400 for mortgage costs ($947 a year)

Leaving $7500 a year before taxes, or $625 in positive cash flow 

COC Return:

7500/59,800 = 12.5%

Cap Rate:

7500/249000 = 3%

Please let me know if I've analysed this property correctly, and what I've missed or could improve.

[Tyler Walker]

Looks like a good analysis. My vacancy rate tends to be a bit higher than CMHC numbers so I would probably use 5-7%. Depending on the neighbourhood.

The only mistake that I see is the cap rate. 3% is typical for Toronto but Windsor is probably in the 6-8% range.

Cap rate is calculated using the Net Income before mortgage payment. So this property would be 18900/249000= 7.6%.

Hope that helps. Tyler