Property analysis in Canada

[Sunil Garg]

Hi.

So I have gone through a lot of the analysis that are presented in the podcasts and one thing that is certain is that we have a somewhat different kettle of fish in Canada.  The same numbers that are easier to post in the USA (like buying a house for 20k) are near impossible in the Canadian markets.

I have been analyzing all the properties I own and the multi-plex properties that I am looking to buy.  If we factor in the mortgage repayments (not the interest), the cash flows are very low or near negative.  If we factor in the mortgage repayment (not the interest) then the CoCR and Cap rates are very low.

Are you guys adjusting these values in your calculations?

Thanks

[David Steinbok]

You cant look at what works in the u.s and think it will automatically work in canada. We have a very different real estate market. The avg price for a detached house in canada is now over 600$ k. So you will never find a house for 20$k. 

super easy calcs that I use are

1. Gross Rent > mortgage p&I + ptax+insurance +200$ buffer for vac/maintenance. 

If it passes with positive cashflow then I move on to quick test #2

2. Yearly noi must be > 10% of total money invested to purchase and prepare house to rent. Coc > 10%

If it passes quick test 2. Then I seriously look at the property and do my due diligence.   

My Rules. 

1: I always put 20% down

2. Never count on appreciation.  It's a bonus for me. 

3. If my cashflow isn't 10% then it's not worth my time. I can find an easier investment model to make a 10% return, with less headaches.