Investment property near university

[Terry T.]

Hello all,

I really need some advice from you! Please help.

A little intro, My name is Terry, currently living Winnipeg, Canada. 26 years old.

Ok, here we go, my friend is selling a rental property near university of Manitoba, 7 mins walking distance from the university. Right now the house is fully rented to 8 students. Having a cash flow of $3200. The house was built in 1963, 1088 sq ft, One Storey bungalow, Land: 6473 sq ft. First floor got 4 rooms, with a kitchen and full bath. Basement 4 rooms 1 kitchen, 1 shower. The house has a detached garage. Property assessment value (Market Value as at April 2012): $275,000 Property assessment value (Market value as at April, 2014): $302,000

My friend has asked for $348,000, I might be able to get it down to $345,000

Here's the calculation

Price: 348,000.00

Mortgage: 1,200.00 ish monthly

Property tax: 280.00

Utilities: 300.00 ish rooming 8 people

Home insurance: 100.00

I am planing to put $100.00 per month for maintenance.

Total expense: $1980.00

Total rental income: $3200 ($400.00 per room)

Net income: $1,220.00

I have been to the place, the place is definitely a "rental place", nothing fancy, not surprised! The only concern I have is, the first floor bathroom has some shower leak, there were some water leak sign in the basement ceiling. I am just concerned it might be a huge expense for me later. I also know somehow I am paying a premium on this house since it's already tenant occupied, cash flow right after the purchase. 

I am just got so emotional on the one, please give me some advise! I really need your help!

Your response would be greatly appreciated!

Best,

Terry

[Ray Slack]

First you need to factor in vacancy.. are the rooms rented all year? or only when school is in session?  ask your friend for his tax returns to show you how much he is getting on an annual basis for rent.. Don't trust what anyone says.. Ask for proof.

Also, what interest rate are you basing your $1,200? payment? (Seems low)   How much are you putting down on the property?  Can you qualify for a mortgage?