@Paul H. very interesting reading. 1% vacancy is the same as your tenant staying an average of 100 months. Already have 1 vacancy and paying 2 to move out. That's 3. You can have 4 more turnovers out of the 7 units in the next 8 years 4 months. Don't know if covid prevented evictions. Some landlords won't get income for 6 months in the states. I use 8%. Your reserves are low. Say you have 7000 sf of flooring. Life span of 10 years. My area it is $6 sf to replace. $42000/10 year life span/12 months in a year =$350 per month for 1 item, Have 2 roofs 25 year life span, 7 sets of appliances and hot water heaters 12 year life span, hvac 20 year life spam, bath and kitchen remodel 20 year life span.etc. Since this is the only reserves I am assuming the repairs must come out of this account. My area it is a $150 per service call.4 calls would take the other $50 per month in your reserves. I use 15% for reserves. Your PM must charge less than the states.
Hi, @Paul H.. This looks interesting. A few questions. What is the cap rate for similar properties? What is your expected NOI/valuation after you bump rents/cash-for-keys, etc.?
If unit 7 is empty, don't pay like it's rented.
Regarding your analysis:
Include an initial repairs budget. There's always something!
Your loan terms look optimistic. I'm certainly not seeing any commercial loans below 3%. Mostly in the 4s.
Vacancy at 1%? Not realistic. I use 8% for MFR.
Unlikely to get a good PM at 5%. I'd figure 8-10%
Maintenance and CapEx will likely be closer to 15%. Maybe a little lower since the garages will have less CapEx over time.
Thanks everyone for taking the time to reply I do agree my Renos, Repair and Vacancy budgets are light.
@Tim Herman You make great points about Vacancy, I have never looked at it over a longer time period (I'll adjust). I'll also adjust my repairs budget as well.
@Jaysen Medhurst Loan terms in Canada, are much better than in the states for some reason. 2.8% is what I would be getting on the high end of the spectrum. Vacancy in the market I am purchasing is very low, with door to door moves at the moment. I will however adjust it up to be more reasonable with the amount of units I have. Property Manager is a flate fee per door, and she's amazing. I use her on my other properties in the area. I've reduced the CapEx initially, because the property is coming with a brand new 50k roof. They are installing trusses, no more flat roof!
Natural gas provides Heat and Hot Water to all the units.