Are you consider purchasing a Rental Residental property with 1-4 units?

I have been investing in Rental properties for the past 7 years. I would like to share with you at this time HOW I evaluate a residential rental property that I am considering buying.

I will use the following property as an example: 319 Broadway Ave, Orangeville Ontario as listed on 519Property

(See my calculations below). What I look for:

a) property should be cash flow positive

b) Return on Investment; I like to be higher than 10%, the calculations below do not include ROI for increase in property value; which would increase the ROI even more

c) there is room for a second mortgage so that I do not need to come up with the entire 20% down payment

Based on this evaluation; this is an excellent investment. Other things to consider when buying a rental property;

-who pays the utilities; tenant or landlord?

-what is the “Curb” appeal of the property (how it looks from the outside can have a great impact on quality of tenants)

-is it currently rented and if so what are the terms of the leases (one year, month to month)

CMHC is implementing new regulations in April that are tightening up lending on Rental Properties. They will not insure a mortgage more than 80% loan to value, and they are only going to use 50% of the rental income to qualify the debt ratios. There are other options available to Investors than going through CMHC insurance. I would be happy to talk to you on how you can still buy a property with less than 20% down. If there is a property that you are interested in I will prepare free of charge a complete analysis like the one below for you.

sarah@dropmyrate.ca

319 Broadway Supplimentary Mortgage Information
		Monthly	Annual
Rental Income		$ 3,100	$ 37,200
Less Expenses:
	Insurance	$ 250	$ 3,000
	Prop Tax	$ 300	$ 3,600
Net Income		$ 2,550	$ 30,600
Mortgage Info:
DownPayment			20%	$ 83,800
Mortgage amount			80%	$ 335,200
Interest Rate			4%
Monthly Pmts (35 yr am)				$ 1,484
***OAC
Monthly Cash Flow				$ 1,066
Annual Cash Flow				$ 12,792
Annual ROI				15.26%

Tags: Investing, Mortgages, Rental Property

This entry was posted on Friday, March 19th, 2010 at 6:17 pm and is filed under Commercial Mortgages, Mortgages, Services, Uncategorized . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.