“Is There Ever a Bad Time to Invest in a Rental Property”

is an article that appeared in the  Financial Post a few years ago
that says it quite well.  The conclusion is no as he runs down some historical numbers on rate of return over 20 years. Investment properties have your money work for you.  The tenant takes care of paying down the mortgage and the market takes care of the appreciation value of the home.  It’s a brick & mortar investment, and if done right, can make you a very happy investor.
You can click here to read the full article

So how do you start?

Speak to someone like a mortgage professional and review your numbers.  You also want to go through a cash flow rental work sheet to ensure you are not losing each month.  Then find a real estate person who has the experience of owning and buying rental properties.
Here is a simple conservative example of a residential rental with purchase price of $375,000.00.

Initial Investment		Return on Investment
Down payment 20%	$75,000.00	Appreciate 5%	$11,250.00
Closing Costs*	$5,500.00	Mortgage Paid Down	$8,204.00
Maintenance fund	$3,000.00	Total**	$19,454.00
Total Invested	$83,500.00	ROI (return on investment)	23.30%

It is a great way to leverage your money and get it working for you. Initial investment of $83,500.00, purchased an asset worth $375,000.00 with ROI of 23.3% in year one.

So where does my initial investment come from? 

Initial Investment funds can come from your savings, the refinance of a home, a line of credit, loan, or it can be a mixture of savings and borrowing.  There are options.

In 5 years time, you could purchase a second property in refinancing the first one.  Then as time goes on you accumulate capital which you can leave in the property and create greater monthly cash flow or you can take it out and use for another property, other investments or whatever you desire.  If you do not want to manage the properties or find tenants, then you can look at hiring a property manager.

If you are considering or would like a cash flow rental work sheet, please feel free to contact me.      marg@deboermortgages.ca

 

*closing cost with approx land transfer tax,   **does not include rental income to keep it simple.

This page is for illustration purposes only — Pricing & rates subject to change O.A.C.E. & O.E.