Did I pay too much? Template needed.

5 Replies

Hello guys,

So I was wondering if any of you can share any templates or rules of thumb you have when deciding if a property is worth the investment. For example, I recently purchased a 5-plex (3-1 bed and 2-Bach) in London Ontario (1.3% vacancy)for 340,000$ I estimate 40,000$ needed to bring the building to tip top shape. I can get around 42,000$ per year in rental income once I renovate. Annual expenses will be about 6500$ total. So my question is..... did I pay too much for this building? From my numbers I cash flow about 20,000$ a year pre-tax. Is there a formula you have that can let me know how much I should pay for a property based of the historic numbers?

Secondly I was also thinking to turn the basement into 2 more bachelor units. How hard will it be for me to get the property rezoned? Can I apply before I am the actual owner? Any help will be greatly appreciated.

My initial investment for this will be about 76,000$

you require permission from the current owner to start the process the city has a form, and even then they recommend the current owner does the rezoning. 

If you are getting 1% of the purchase price every month you are doing pretty well.... those deals are hard to come by. 

Why do you think the property needs to be rezoned? What's the current zoning? I'd be surprised if a 5-plex is allowed by your zone but not a 6. You'll probably just need building permits, and that will require a plan that meets all the building and fire code.

just curoious is that the 5 plex on hale st, london, On?

If I understand the numbers correctly, the $40k in rehab costs puts you all in for $116k on the property. The $20k cash flow gives you a ROI of a little over 17%. Doesn't seem too bad to me.

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