It's up here in Canada in a small town, steady but slow growth. Buy and hold. Trying to think of everything before I make the leap into purchasing my first rental property. Excuse my "terms" as I'm a newbie to this and always searching for info. I've followed Bigger Pockets for a few months now, absorbing as much as I can. The unit is on the second floor of a 12 unit complex which has 4 buildings for a total of 44 units.

According to the numbers, (4 square method) its a $40/month for Cash flow, However, the cash on cash return is .019 % not high at all. I’m learning and figured this may be a good place to start as it’s $125,000 purchase price (maybe $120,000). Small enough to learn.


Any comments or thoughts/advice what to remember or really look at when taking the leap of faith for a rental property?


Thank you to all.

Cheers, 

Kevin 

So it is a condo?  My best comment is that just because something has a low purchase price does not mean it is a good investment, in fact it may be a worse investment if all of the percentages are the same as a larger property because it requires more management per dollar of profit.

Hey thanks Aaron.

It is a condo yes, I was looking at it from a learning stand point having something that is still profitable yet teaching me as well.

A side note here (if I proceed with this) I will be putting a lump sum down again in a years time. This will create better cash flow and the numbers will then look appealing.

Thoughts?

$120K to Purchase

Down Payment: ?
Loan Interest rate: ?
Rent: ?
HOA: ?
Tax/Insurance: ?
Anticipated vacancy rate:  ?

$120,000 purchase price

Interest %2.64

Down payment $24,000
Transfer fee $1,000

Lawyers $500

Tax $519

Insurance $400

Mortgage $440

Rent $950, tenant pays utilities 

Anticipated vacancy rate %5

Cash invested $25,900

Thanks for your time :)

I love any feedback and critical criticism as I’m just starting out, I take nothing personal.

Cheers to all!

@Kevin Potvin Where in Canada is it? I would run the # again. For $40/m there is not enough room for you make a mistake. I understand you want to use this as a learning experience, but you can find deals that will give you a better return AND learn. For example, vacancy of 5%..the unit will be vacant for 2.5 wks out of a month??? Use 8.33% as a min. Also, where is the maintenance fee? Are you aware of special assessments? You are putting in 21.5% d/p and willing to put in more the following year.... If you do this, you are not leveraging your money (and the bank's money (OPM)) to the optimum. 

I believe the Cash on Cash ROI you state is way to low to use this as a learning opportunity. Too much risk! I would say the learning experience has just been had by the discovery of that number. Be eager, keep looking for something better, but be patient too!

$40 per month cashflow is just too low.  If one thing goes wrong you are negative cash flow.  I think you should look at other deals.  Take your time analyzing the deals that present themselves. That's why it's always a good idea to have a second set of eyes look things over.

Trust me you will regret low cash flow. My first house was similar. I paid way too much and actually would have been negative cash flow had I rented it out. I couldn't keep it a float. Lost it in foreclosure. Don't do what I did.

This a huge eye opener and very much appreciated!

Thank you everyone :)