Canadian Money Forum banner

1 - 6 of 6 Posts

·
Banned
Joined
·
3 Posts
Discussion Starter #1
Hi guys,

Long time reader and first time poster. I was referred here a while back by Milliondollarjourney and I've been going back and forth on a daily basis on both sites. Both very resourceful may i say! great job guys.

A close and very reliable friend of my brother's is a realtor and he has this property for sale and I'm in the consideration stage. This is my first time dabbling in the real-estate market. I've always rented. I'm not buying this as my residence, but as a rental property.

I'm just wondering what red flags you guys see.

Here are the stats:

- Reposessed unit
- 2 story building currently has no strata (old building, 1990)
- fairly central location for students (transit, food etc)
- Property is being sold at $25000 less than its current value.
- Monthly rent is $700 (already rented out to Korean students)
- 0-down mortgage would be around $600

I'm meeting with the guy Saturday to check out the place and ask him any questions etc etc.

I was wondering about a couple of things:
1. Can I get the property value re-assessed myself?
2. Are there any hold period for reselling on repossessed places (I'll ask realtor too).

Any other insight would be great.

Thank you.
 

·
Registered
Joined
·
2,892 Posts
To answer your first question: Yes, you can get your own agent, who can give you an estimated appraisal of the property.

Which I would recommend.

Keep in mind you are buying a property from someone who makes money when it sells. Period. If it is such a good deal why didn't the agent snap it up himself.

And get a home inspection. Why would someone sell, at potentially the top of the market, for a $25K reduction, if the place is already rented with positive cash flow? If it is a repo bank sale, how did the first owner not make payments if they covered the mortgage? Maybe the appraisal is too high. I dunno.

Also...I think the gov't cancelled the 0 down mortgages...I think you will need to come up with 5% down.
 

·
Registered
Joined
·
2,054 Posts
Well my estimate is that there is no positive cash flow on this property.

On top of the mortgage you will have some kind of building maintenance fee.

Then you have insurance for renters

Then you have property taxes

Then you have unit maintenance which will cost you here and there fixing taps and toilets and replacing things as they wear out.

Then even if you manage the property yourself you have to account for property management of about 10% (You deserve to get paid too)

Then you need a vacancy allowance which depends on the rate in your area

Then you need to determine what the market rent in the area is. If its $500 you may be in trouble it it's actually $1000 then that's more attractive.

If the numbers don't work, then don't buy.

Without even having seen the property my feeling is that after all these expenses are paid you'll be subsidizing your tenants rent about $300 per month. Plus your capitalization for the first 5 years is non existent.

There may be other fundamental reason why you might want to buy this particular property but unless there is more info I vote no.
 

·
Banned
Joined
·
3 Posts
Discussion Starter #4
Thanks guys, some good points. I've always gotten the feeling that when something is too good to be true, then most of the times, it's not.

Cal, I was asking myself the same questions. Thanks guys.

Berubeland, thanks for the reply, tons of info there :)

I'll keep you guys posted.

cheers
 

·
Registered
Joined
·
514 Posts
Berube, the OP wants this property b/c real estate always goes up! positive cash flow is not a requirement for a good RE investment...

um, oops, sorry I was referring to 2007 RE investment guidelines. please ignore the above as it didn't apply before that time period and won't apply for many years to come...
 
1 - 6 of 6 Posts
Top