All Forum Posts by: Marc-Andre Bordeleau

@Marc-Andre Bordeleau

We are looking at 16-unit with comparable revenue (actually a little higher at $12,500) - on the expense side, our taxes are much higher, so in the end they would be close.

Be certain that you have not underestimated the expenses.  Though the tenants are paying their own heat and lights, you will still have a house electrical meter for common areas, expenses for groundskeeping (snow removal, lawn care), water and sewer, garbage collection, janitorial, pest control, administration/accounting/advertising, etc.   You should also make allowances for economic vacancy (10% if you do not know the actual physical vacancy, loss to lease, turnover, eviction and legal); maintenance (10%) and Property Management (7 - 9%, even if you plan to manage on your own).

When I plug-in typical local values for the above, given the revenue you presented, I get a CoC in the range to 6.25 - 6.5% ... at your purchase price. The (M)IRR is also not that impressive (less than 3.5%).

When you factor in your closing costs (probably $16 - $20K), the price you are paying for the net income (essentially the Price to Earnings (P/E) of the property is around 5.0 - 5.25.  In my experience, I get wary anytime you are paying over 3.0 - 3.5 as you have no real room to handle rising interest rates or hard times.

The ask of 1.76M is ridiculous.  My guess is the current business appears to support a price more in the vicinity of $1M to 1.175M (maybe 1.2M).  Obviously there is a lot I do not know about the property and I've made a heap of assumptions on the operating cost side of the house, but unless there is some fantastic, unrealized potential with the property, don't be tempted to overpay and try to make-up for it later.   

I would also look for a lender who will be willing to either take a downpayment of 25% and/or allow the Vendor to carry-back a 10% second ... check to see if the property can meet CMHC requirements  for multi-family which will give you access to better rates and a lower downpayment ... 

That's $110k a unit and it rents for $769 a month? And COC of 7.15%? I would just take that $375k and passively invest in someone else's deal and get higher returns than that.

@Marc-Andre Bordeleau I would agree with Michael. But I see you aren't investing in the States, right?

Maybe @Roy N. can chime in. He is active on all things Canada multifamily.

@Marc-Andre Bordeleau- I'll help you.  All you have to do is find the deal.  Buying apartments is extremely competitive... I'll help you get across the finish line... We just need something where the numbers work.

I bought a 12 unit as my first investment, with 2 partners. It was a great experience because I got the property management company involved early...they walked the property and helped me inspect it, made a budget for the year, and steered me towards good contractors, etc.

Of course, this assumes you have money. If you do not, you need to first find your money partner. 

But first comes education: How many books on apartment investing have you read? Which podcasts do you listen to every week? Have you taken any courses? I educated myself for about a year before I jumped in. 

The only regret I have is selling the building when one partner wanted his investment back out after only a year so he could blow his lifesavings on a brewpub.