Hypothetical Deal Analysis

[Alessandro Di Luciano]

Looking to pick the brains of all the smart investors on the BP Forums regarding this hypothetical deal analysis!

Triplex in Toronto, Ontario:

Purchase for $1M with 33% down ($330,000)

Monthly:

Mortgage $3,500

Insurance $250

Prop tax $750

Maintenance $500

Vacancy $600

=$5,600

Conservative Market Rents $6500

Actual rents just under $5900

and looks to be approved for a coach house in the back.

shoot me some questions, issues, and thoughts on this breakdown!

-ADL

[Scott Trench]

The projected NOI is $52,800 in this example, or in other words, the cap rate is 5.28%.

 The interest rate on your debt is likely much higher than that cap rate. If you are bringing this much down ($770K), I'd only do this deal closer to the $800K price point range, personally, bringing it to a 6.5% Cap rate (on projection). Vacancy assumption at 10% is pretty high. 

However, if I insisted on going through with this purchase, despite the cap rate lower than market interest rates, and I brought this much down, I'd hope to get much more favorable debt terms, including a lower interest rate, from seller finance for the remaining $330K.