This post is a case study of one of our rental income properties from its initial acquisition to date.
Hope you find it helpful!
Hope you find it helpful!
Rental Income Property
This freehold town house is located in a nice family-friendly neighbourhood of Barrie, ON.
At purchase, the house was about 35 years old. Previous owner had it for over 20 years. She lived in it during the first 10-12 years, and then rented it out.
We were happy that the property came with tenants and had positive cash flow. We realized that the house would need to be updated eventually once the original tenant would move out.
Key features:
- Freehold town home
- Built in 1982
- 3 bedrooms, 1+1 bathrooms
- Finished basement
- 1 car garage
- Electric heating
- Washer, Dryer, Dishwasher, Water Tank
- No AC
Purchase
We got this house privately without a real estate agent. Click to read the full story at Our second rental income property
- Asking price: 189K
- Purchase price: 185K
- Found on: Kijiji, private sale
- Rent: $1,200/month
- Expenses:
- Utilities: Paid by tenant
- Taxes: ~ $200/month
- Insurance: ~ $100 / month
- Financing: 80 LTV, 30 year amortization, 5-year term, variable 2.5% interest
Total Investment
This property required a 55.5K investment.
A major renovation had to be completed in 2015 after tenant's Christmas party went really wrong. Renovation cost is listed as capital improvements in the investment summary below. Read full story about this renovation in Our House Was on TV blog post.
A major renovation had to be completed in 2015 after tenant's Christmas party went really wrong. Renovation cost is listed as capital improvements in the investment summary below. Read full story about this renovation in Our House Was on TV blog post.
Investment Summary
Investment | Amount |
---|---|
Downpayment | $37,000 |
Closing Costs | $3,196 |
Capital Improvements | $15,450 |
Total | $55,646 |
Cashflow and ROI
- Total return on investment (ROI) is 34%, or 8.5% annually
- During the first two years, cash flow was negative
- Cash flow was positive in Years 3 and 4
- 2016: $217 / month
- 2017: $598 / month.
- Net profit has been positive every year
- Annually, on average, the property runs with:
- ROI of 8.5%
- Cash on Cash return of 3%
- Cash Flow of 1.5K
- Net profit of 4.7K
Year 2014 | Year 2015 | Year 2016 | Year 2017 | TOTAL All Years | Average Annualized | |
---|---|---|---|---|---|---|
Income | ||||||
Rents (@100%) | 7,200 | 14,400 | 17,700 | 17,700 | 57,000 | 14,250 |
Vacancy | 4,250 | 1,400 | 0 | 5,650 | 1,413 | |
Total Gross Income | 7,200 | 10,150 | 16,300 | 17,700 | 51,350 | 12,838 |
Expenses | ||||||
Taxes | 3,815 | 2,475 | 2,381 | 2,464 | 11,136 | 2,784 |
Insurance | 323 | 730 | 1,412 | 1,018 | 3,483 | 871 |
Repairs/Maintenance | 93 | 1,456 | 3,184 | 42 | 4,775 | 1,194 |
Utilities | 495 | 832 | 0 | 49 | 1,376 | 344 |
Admin/Advertising | 0 | 0 | 47 | 0 | 47 | 12 |
Total Expenses | 4,726 | 5,493 | 7,024 | 3,573 | 20,816 | 5,204 |
NOI | 2,474 | 4,657 | 9,276 | 14,127 | 30,534 | 7,633 |
Mortgage - Interest Payment | 1,832 | 3,350 | 3,131 | 3,330 | 11,643 | 2,911 |
Mortgage - Principal Paydown | 1,972 | 3,446 | 3,530 | 3,615 | 12,563 | 3,141 |
Cash Flow | -1,330 | -2,139 | 2,615 | 7,182 | 6,328 | 1,582 |
Net Profit (Loss) | 642 | 1,307 | 6,145 | 10,797 | 18,891 | 4,723 |
Cash on Cash Return | -2.39% | -3.84% | 4.70% | 12.91% | 11.37% | 2.84% |
ROI | 1.15% | 2.35% | 11.04% | 19.40% | 33.95% | 8.49% |
Appreciation / Equity
Based on MPAC assessments, the value of the property increased by 42K during the last four years. Once we include the equity gain in ROI calculations, return on investment becomes 27% per year:
- Total gain including appreciation: $18,891 + $42,000 = $60,891
- Total ROI including appreciation: 109% overall and 27% annually.
History
2017
- Great tenant renews lease. Hurray!
- Bank of Canada increased interest rate. Mortgage payment went up.
2016
- Plumbing issues cost about 3K
- Change of tenant - new great tenants moved in.
2015
- Major renovation from January to June.
- Great tenants moved in July 1st
2014
- Purchased in May - Our second rental income property
- Christmas - Shooting at the house
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