Purchase includes full tenancy - 4 x 1 year lease
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Purchase includes full tenancy - 4 x 1 year lease
You're not including property tax. Most places do have property taxes. I just looked up property taxes in Toronto and it goes as high at 1.7% for multi-residential? Also there are other hidden expenses that add up. For example if a tenant has black mold they can sue in the US and most insurance policies don't cover it. Maint., legal, and repairs all for $2,469 is too low for 4 units. How did you come up with that? How did you come up with a 95% occupancy rate? 95% is the high end for big apartment complexes.
Several things to consider...
Looks like you are buying retail at full price. This will limit possibility of appreciation unless your area experiences a boom of employment or similar.
How does this property compare to competition?
Your maintenance costs will increase each year. If the place was just renovated you have about a 5 year honeymoon of low repairs, then things begin to break.
A mad/dirty/negligent tenant can cause a lot of damage. You have to have good contractors ready to jump in and get your apartments ready to rent.
What is normal vacancy rate in your area?
Are any of the renters related to or beholding to the current owner? Under the table back door agreements can result in immediate vacancies after closing.
Thank you for your feedback. We have tenancy agencies that easily connect renters with landlords. I'm sure you are familiar, they charge a management fee of 5% and take care of the legal aspects up to litigation.
The building was fully renovated 4 months ago, pictures look great. If we consider I will be inspecting the property on Monday and getting all the small details such as property tax.
The numbers were provided by the seller from 1 year of operation. I still have to do my due diligence
I own a 4 plex
I want to get rid of it
I don't want another one.
I would never get anything under 10 units again.
They're simply not worth the hassle, IMHO.
If you've never had a rental property before, get your feet wet in a smaller multi, gain experience, build some equity, and network to get contacts in REI. If REI ends up being something you enjoy then you can always dump the smaller multi to get your equity out, or leverage it for other investments.
Why are +10 units better? I don't have the capital or experience to jump into a larger venture ATM. 10-unit apartments in MTL go for $1.1 mill
If you've never had a rental property before, get your feet wet in a smaller multi, gain experience, build some equity, and network to get contacts in REI. If REI ends up being something you enjoy then you can always dump the smaller multi to get your equity out, or leverage it for other investments.
Definitely. That was the first thing that caught my attention. Basically give 1month out of a year as vacancy...You probably should make the vacancy at least 10%.
Honestly I just learned by being in the space. My wife was a new agent at the time and when McGillvray's 'Income Property' show first came out, I simply said "We can do that!"@LateStarter and @eribruski
For a fellow Torontonin interested in REI, would both of you mind sharing some essential resources (books, podcast, websites, etc) to read and study to assemble some acumen in the area?
Thank you.
Anyway, my view is that the Toronto market and many of the burbs are too hot right now and are over-inflated. Rents haven't kept up with house prices so buying one now means significantly less cash-flow (if any). Some areas like Oshawa and Barrie are still somewhat reasonable while places like KW are catching up to Toronto prices. Hamilton is reasonable too but you have renters that can be difficult.
Just be careful looking at properties outside of areas you live. You need to be intimately familiar with what's going on in the local market. It's a challenge to do this remotely. If you don't live in the market you're looking to buy, then take an extended trip there and talk to a bunch of locals and learn what's going on in the local economy and community. Get in touch with local agents too and discuss properties that sold recently, who's buying them (foreign investors, families, etc) and what the local rental market is like.
If you insist on buying in a hot market, be prepared to submit an offer sight unseen just to lock out others from scooping it. Keep a condition in the offer so you can walk away if it's not as it appears.
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