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Updated over 5 years ago,

User Stats

62
Posts
58
Votes
Dylan Earl
  • Thorold, Ontario
58
Votes |
62
Posts

3rd Purchase - Analysis feedback

Dylan Earl
  • Thorold, Ontario
Posted

Hello all, 

I currently own a 6 bedroom house as my principle residence with my wife, and rent out the main floor (x4 bedrooms) which helps to cover mortgage, utilities etc. I purchased a 2nd piece of property earlier this summer - vacant land up north, as a partnership with 5 other guys I work with/for... It's sized at 13.5 acres but we are going to do a development there in the future...costs are next to nothing (liability insurance and PT) maybe $150/mo

I am looking at picking up a 3rd property, being another rental property. 

Timing Wise: I see our fourth house will be our "grow our family" / hunker down house. Based on all the listings and showings I've seen that are "close" to what we would want, are currently out of our price range in terms of month to month affordability (comfortably anyway).

Trying to decide if it makes sense to pickup 3rd property to be rental property prospective numbers on a specific listing I am back and forth on... which are as follows:

List price: $399,000

I would offer: $370,000 based on a walkthrough I did... needs new roof ($6000), everything is outdated (floors and doors), the property is a mess (outside is uncut/overgrown/weeds everywhere), Garage ceiling has mold and water damages inside...will need new blown in insulation etc

I'd go 10% down: $37,000

Closing costs estimate $9500 (approx 2.5%)

immediate repairs/renos: $25,000 (I will roll this into the mortgage)

Capital Req: $47,000

Anticipated Mortgage: 3.2% 5 year fixed, 25 year amortization: Cost/mo approx $1650

Taxes, Maintenance, Insurance: $675

My monthly expenses would be approx total: $2275

I expect $450/room + utilities on tenant x 6 rooms = $2700

Net: $425/mo

I cannot afford the $47,000 up front capital so I'd either have to partner with someone/others (50% or 33% or 25%)

Does this CF seem too low for the investment... I mean if I put 50% up say 23,500 in and get 50% net revenue = $212.50... it's going to take like 10 years just based on cash flow... 

I can hope appreciation would be 2-3% per year (let's assume after Renos is $400,000) but is relying on that appreciation enough to offset the potential costs of vacancy, damages etc? 

Looking for feedback/thoughts as this is a new thing for me and I want to make it work... but also need to build the confidence to assure my wife we are good to keep this thing going!

Thanks everyone