If you ever wonder what it is like to own a rental property, read on! This post will tell you how we got a triplex, what the numbers look like and what sort of property management adventures we ran into over the past few years.
Rental Income Property
Like many other homes on this quiet old street, the house has a gorgeous flower garden around it. You can sit down on a wooden porch and listen to the church bells ringing on the hour in the distance not too far. I love the peace and tranquility.
Key features:
- Triplex:
- 1 bedroom in a side wing comes with a small back yard
- 2 bedroom on the main floor comes with a nice back yard, washer/dryer/dishwasher, and lots of storage room in the basement
- 2 bedroom on the second floor has an incredible feel to it, thanks to mezzanine like ceilings
- 1 car attached garage
- Corner lot
Purchase
This home is our very first investment. Stars aligned in a special way when we got it. You can read the full story at Our First Rental Income Property.
- Asking price: $344,900
- Purchase price: $340,000
- Found by: Real Estate Broker on MLS
- Zoning: Legal nonconforming triplex (sigh... I didn't know zoning could be an issue at the time)
- Rent: $850 + $895 + $750 = $2,495/month
- Expenses:
- Utilities: ~$410/month
- Taxes: ~ $280/month
- Insurance: ~ $200 / month
- Misc: ~$100 / month
- Expected NOI: $1,505 / month
- Financing: 80 LTV, 30 year amortization, 5-year term, variable 2.98% interest
- Expected Cash Flow: ~ $400 / month
Total Investment
This property required a 82K investment.
The biggest capital improvement so far was installing a new flat roof on the garage in 2017.
This was an expected investment as problems with the original flat roof were brought up during pre-purchase inspection. We did not know at the time that flat roof installation can get pretty pricey.
The biggest capital improvement so far was installing a new flat roof on the garage in 2017.
This was an expected investment as problems with the original flat roof were brought up during pre-purchase inspection. We did not know at the time that flat roof installation can get pretty pricey.
Investment Summary
| Investment | Amount |
|---|---|
| Downpayment | $68,000 |
| Closing Costs | $5,500 |
| Capital Improvements | $8,389 |
| Total | $81,889 |
Cashflow and ROI
- Property has been cash positive from the get go
- Cash flow averages $500 / month or 6K per year
- Net profit is approx. $900 / month or 11.9K per year
- Cash on cash return is 7.3%
- ROI is 58% over the four years and 14.5% annually on average
| Year 2014 | Year 2015 | Year 2016 | Year 2017 | TOTAL All Years | Average Annualized | |
|---|---|---|---|---|---|---|
| Income | ||||||
| Rents (@100%) | 18,335 | 31,750 | 34,200 | 35,200 | 119,485 | 29,871 |
| Vacancy | 1,300 | 300 | 1,600 | 400 | ||
| Total Gross Income | 18,335 | 31,750 | 32,900 | 34,900 | 117,885 | 29,471 |
| Expenses | ||||||
| Taxes | 3,824 | 3,768 | 4,319 | 3,858 | 15,769 | 3,942 |
| Insurance | 1,217 | 2,148 | 1,961 | 1,926 | 7,252 | 1,813 |
| Repairs/Maintenance | 1,157 | 1,997 | 1,463 | 5,109 | 9,726 | 2,432 |
| Utilities | 1,946 | 2,201 | 5,616 | 5,496 | 15,259 | 3,815 |
| Admin/Advertising | 34 | 45 | 30 | 0 | 109 | 27 |
| Total Expenses | 8,178 | 10,159 | 13,389 | 16,389 | 48,115 | 12,029 |
| NOI | 10,157 | 21,591 | 19,511 | 18,511 | 69,770 | 17,443 |
| Mortgage - Interest Payment | 4,364 | 6,145 | 5,670 | 6,105 | 22,284 | 5,571 |
| Mortgage - Principal Paydown | 4,147 | 6,347 | 6,502 | 6,661 | 23,656 | 5,914 |
| Cash Flow | 1,647 | 9,099 | 7,339 | 5,745 | 23,830 | 5,957 |
| Net Profit (Loss) | 5,793 | 15,446 | 13,841 | 12,406 | 47,486 | 11,872 |
| Cash on Cash Return | 2.01% | 11.11% | 8.96% | 7.02% | 29.10% | 7.28% |
| ROI | 7.07% | 18.86% | 16.90% | 15.15% | 57.99% | 14.50% |
Appreciation / Equity
Based on MPAC assessments, the value of the property increased by 33K during the last four years. Once we include the equity gain in ROI calculations, return on investment becomes 25% per year:Total gain including appreciation: $33,000 + $47,486 = $80,468
Total ROI including appreciation: 98% overall and 25% annually.
History
2017
- December - Two great tenants renewed leases. Hurray!
- Nov - Dec - Fixed stucco
- September - New garage roof and eaves repairs
- August - New super-awesome tenants moved in. Rent up by $200 💪
- June - Tenants moved out. They'd like a bigger place with parking.
2016
- December - Two awesome tenants renewed leases. Yay!
- September - new washer
- July - New tenants! Rent is already at market, no change
- June - One of the great tenants moved out. He is relocating to the West coast
2015
- November - Fixed a garage light. Turned out wiring issue. Cost $700. I couldn't believe it!
- October - Found new great tenant! Rent up by $200 💪
- October - Old furnace suddenly died. New furnace installed as a rental
- September - Another good tenant moved out because he found lower rent closer to university.
- September - Found a new awesome tenant via referral. Rent up by $200 💪
- August - Amazing tenant moved out - engagement 💕
- February - Pipe broke! 💦
2014
- October - New amazing tenant moved in. Rent up by $50 per month 💪
- September - Tenant got engaged and moved out 💕
- September - new dryer
- June - First ever tenant request: clogged sink 💦
- Purchased in May - Our First Rental Income Property.
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