This is a real example based on a townhouse purchased in March 2005.
Purchase Price: $113,000.
Down Payment: 25% down. The fund is from equity line of credit. Interest only. Interest rate 4% anually. Annual payment: $113,000 X 25% X 4% = $1,130/year.
Mortgage: 75% purchase price. 25 years term. Three years fixed term at 3.6%. Principal is 1.7% of purchase price. Annual payment: $113,000 X 75% X(4%+1.7%) = $5,170/year.
Property Tax: $1,200/year
Strata Fee: $145.20/month => $1,743/year
Property Management: $50/month + 7% tax => $642/year
Repair: $50/month => $600/year
Rent: $900/month - 5% vacancy rate => $10,260/year
Total cost per year: $1,130 + $5,170 + $1,200 + $1,743 + $642 + $600 = $10,485.
Annual Cash Flow: Revenue - Expenses = $10,260 - $10,485 = (-$225)
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Two years have passed, and the interest rate has risen to 6% for the LOC part, and 5.2% for the mortgage part. Ignore the principal paydown, annual expenses increased by $1,243; rent increase from $900 to $950, for an annual increase of $570. This results in a negative cash flow of $898 per year.
P.S.: Notice a principal of 1.7% is considered an expense because this is a have-to payout for every month. This in reality is not expensed but sinks in as equity. This part is $113,000X1.7% = $1,921/year. If this is excluded from the expenses, then the property yields a positive cash flow of $1,023 every year.
P.S. 2: If you would purchase the townhouse today, you would have to purchase it at a price of $180,000. It is no longer possible to get a positive cash flow in either way.
Cash Flow Analysis: A Canadian Example
meierrd 发表评论于
Cultuslake,
Thanks a lot for the info ! I will try these resources.
Thanks a lot for the info ! I will try these resources.
cultuslake 发表评论于
In Canada there is a government agency issuing report about vacancy rate for every major city, there must be a similar organization in U.S.
You local newspaper must mention this vacancy rate from time to time.
Also, there must be local apartment owners' organizations.
You local newspaper must mention this vacancy rate from time to time.
Also, there must be local apartment owners' organizations.
meierrd 发表评论于
Cultuslake,
Thank you very much for quick response and advices!! I'm using realtor.com, but my concern is: for a specific house I'm interested in, (assuming based on the paper calculation, the rent can cover the morgage ane expenses with 5% vacancy assumption), I don't know how easily I can rent it out in reality, -- I think this depends heavily on the very local environment (which portion of the area.., which neiborhood). I can find out the general info of the whole area from internet, but the info of such very local preference can't be found..., I guess..., so I was thinking to ask agent.. What's the best way to get the accurate info on these types of info? Thanks again!
Thank you very much for quick response and advices!! I'm using realtor.com, but my concern is: for a specific house I'm interested in, (assuming based on the paper calculation, the rent can cover the morgage ane expenses with 5% vacancy assumption), I don't know how easily I can rent it out in reality, -- I think this depends heavily on the very local environment (which portion of the area.., which neiborhood). I can find out the general info of the whole area from internet, but the info of such very local preference can't be found..., I guess..., so I was thinking to ask agent.. What's the best way to get the accurate info on these types of info? Thanks again!
cultuslake 发表评论于
You can use the internet to search for properties. Try www.realtor.com. When you are interested in a property and want to view it, call the listing agent for an appointment.
You have to spend the time to do the search. You cannot expect a realtor to constantly give you information. Also, most realtors are not investors and they do not know much about real estate investment.
It is very easy to verify rent, just check local newspaper to see the rent range. Start reading the real estate section of your local newspaper.
As for positive cash flow, it is increasingly difficult to find these, but if you go far enough from the metropolis, chances are you can find one. This really depends on where you live.
You have to spend the time to do the search. You cannot expect a realtor to constantly give you information. Also, most realtors are not investors and they do not know much about real estate investment.
It is very easy to verify rent, just check local newspaper to see the rent range. Start reading the real estate section of your local newspaper.
As for positive cash flow, it is increasingly difficult to find these, but if you go far enough from the metropolis, chances are you can find one. This really depends on where you live.
meierrd 发表评论于
Cultuslake兄，
读了很多您的关于房地产的大作， 受益良多。 我们在美国，也正在想开始(业余)做， 想向您请教：
怎么能找到好的项目？ 我们想通过网上，报纸查找周边有发展的地区(county)，然后通过real estate buying agent找到具体的有positive cash flow(或能打平）的房子， 想法是否行的通？一方面觉得要依靠agent ，因为他们应该对地区具体情怳熟，但担心他们是否会告之真实的房子可租性及其他地区具体形势 （毕竟他们只想卖给你房子），哪些可以相信，及如何查证他们告诉的情怳（例可租性）是真实的？谢谢不吝赐教。
读了很多您的关于房地产的大作， 受益良多。 我们在美国，也正在想开始(业余)做， 想向您请教：
怎么能找到好的项目？ 我们想通过网上，报纸查找周边有发展的地区(county)，然后通过real estate buying agent找到具体的有positive cash flow(或能打平）的房子， 想法是否行的通？一方面觉得要依靠agent ，因为他们应该对地区具体情怳熟，但担心他们是否会告之真实的房子可租性及其他地区具体形势 （毕竟他们只想卖给你房子），哪些可以相信，及如何查证他们告诉的情怳（例可租性）是真实的？谢谢不吝赐教。
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