Canadian Turnkey Deal
Fort Mcmurray Alberta, Canada · Member since 2017 · 26 posts · 3 votes
Hi I'm Looking to get into Real Estate Investing I got this Deal from a local turnkey company here in Canada from the looks of it the deal isn't good.
What's your opinion?
2 bedroom Condo
Deal Selling Price : $269,900
1st Mortgage @ 80% : $215,920
Down Payment @ 20% : $53,980
Estimated Legal Cost : $1,300
Total Money Cost In Deal : $55,280
MONTHLY INCOME
Rental Revenue : $1,510
Less Vacancy ( 5% ) : $76
Net Rent : $1,435
OPERATING EXPENSES
Property Tax : $151
Condo Fees : $251
Property Managment ( 4% ) + GST : $60
TOTAL EXPENSES : $462
Net Income Before Financial Expenses : $972
Finance Expenses : $910
3% Variable Interest Rate
30 Amortization ( Years )
5 Year Mortgage Term
CASH FLOW : $62
Average Principle Paid on Mortgage : $399
NET GAIN : $461
Interesting. Having never purchased anything over 250k (I bought a six plex for 150k, my highest price ever) I didn't know that things scaled up like that. Thanks!
these numbers are normal for a condo in Toronto. I wouldn't invest in it as you only depend on appreciation, not cash flow. If you want to invest, there are better deals an hour drive from Toronto. I invest in KWC and Hamilton area. Most of my "Deals" come from MLS (yes, I negotiate deals although many ppl. might think MLS doesn't have deals)
My recent 2 deals were 30k below asking/market and other was a BRRR (Waterloo and Hamilton) - both off of MLS.
You just have to be creative. Other option is off market deals, I work full time and don't have time to knock doors or send flyers so I spend time where I'm good at - creating deals. I've had wholesalers bring me deals but none were that good (wholesalers have brought me great deals in London which is currently not my target OR Windsor which is currently high risk market as per many lenders I spoke to)
I also have a condo in Toronto which I bought pre-construction (due to the layout. 1+den with 2 bathroom for price of 1 bedroom. The den is large enough to be a bedroom. It will generate a positive cashflow when built.)
Second condo is a 1 bedroom at M-city (very first phase/batch) which I got for a pretty good price due to relationship with the brokers. (Platinum VIP). It will also cash flow once built. High floor facing city, etc.
These condos were primarily for speculation (which has worked well) but I CYA'd since I knew I can cashflow with these. Do not buy a negative cashflow property unless you are confident you can maintain it in the long run.
These are my thoughts after investing 5+ yrs in GTA. Some might agree, some might not. But everyone makes money in uptrend market. Real test is when things turn around, will you survive? Hope this helps the OP.
These are pretty typical numbers in Toronto even with the interest rates we have now. It unusual to have a condo purchase cash flow unless the down payment is ridiculously large. There was an article in April about almost half of all condo investors not being able to cover their mortgage with the rent they are getting.
https://betterdwelling.com/cibc-over-44-of-toronto...
Having been an auditor in a previous career, I've never been a fan of them especially later in their life cycle.
I agree with Matt in that the cash flow properties are outside of the GTA. Most seem to prefer Southwest Ontario but there are good opportunities east of the GTA as well.
I don't see the situation in the GTA getting any better either. Housing shortage, stress test and higher interest rates are a toxic combo. Will be many years befor the housing shortage mess is cleared up if at all.
A local investor I know has 1 unit in prestigious towers in Montreal. He pre-bought the 2nd and 2rd phases already. His rental income does not cover the expenses of running the property. His sole saving grace is the hope the appreciation kicks in to high gear and the principal payback. He has been forced to resort to Short term rentals in order to cover his mortgage. It's nuts why would anyone invest in these is beyond me.
Yup, actually my cousin invested in one of those towers for negative cashflow. Gained 0% appreciation since 2012 (pre-construction purchase). it's a big gamle.