For example, a 1+1 at city place with parking and locker is now renting around $340,000 to $350,000. After 30% down payment, you borrow around $250,000 from the bank for 20 years, and your monthly mortgage payment is $950, and your maintainence fee is $350, and tax is $150, which totally added up to 1450. Such unit can be rented at $1700 to $1750 in the market. You can easily make a $250 to $300 cash gain. Also, never forget you have around 50% of mortage payment goes to yourself, only another 50% is waste as interest payment, so there will be another $475 income. These totally add up to around $750 income per month even if without any capital gains! Btw most maintainence fees do include water and heat, and for hydro bill, everyone knows tenants pay for this! There are many more examples here. Can any other investors give a live example to show us how you make a positive cash flow here?
several points:
* you now have an investor putting more equity than usual with 30% down payment !
any proper r/e investor would be looking at calculations with 20% (or less dp).
a good r/e investment should carry itself fully with 0% down but not realistic as a down payment will be required
* your original assertion had to do with pre-construction selling for $750-1000 psf (ie. "$750-$800 psft such as Casa2, Massey, Indx, 1000 Bay, Britt, Karma, Five etc. Some newly added units at One Bloor, U condo, Aura, Exhibit, Yorkville Plaza, Yorkville Condomium etc all selling at $800 to $1000 psft." )
* in your current example with a CP condo you have provided completely inaccurate figures for the mortgage payment in both scenarios of 20-year and 25-year amortizations;
in addition as someone else noted, one cannot get a fixed rate for the full term of the amortization Canada, unlike our neighbours to the south;
you can NOT say the principal portion goes to the owner, as s/he has borrowed the funds and all of it needs to be repaid to the financial institution
> $250K for 5-year term / 20-year amortization @ 3.0%:
monthly mortage payment is $1,384/m with principal and interest portions ranging from $763-883 and $621-501, respectively.
at the end of 5 years, $200,695 balance is outstanding.
in this example, $1,384 mortgage + $350 maintenance (where is the parking and locker maintenance fee?) + $150 tax = $1,884; which is more than the $1,750 top rent you illustrated.
btw, the total cost of $1,884 has not included owners' property insurance and other auxillary costs, etc.
> if in the next 5 years the rate goes up by 2% to 5% from 3%, $200,695 balance for 5-year term / 15-year remaining amortization :
monthly mortage payment is $1,582/m with principal and interest portions ranging from $754-961 and $828-620, respectively.
at the end of 10 years, $149,480 balance is outstanding.
$1,584 mortgage + $350+ maintenance + $150 tax (both which are sure to go up in the future) = $2,084+
considering rents have been mostly stagnate the past decade and this building will be 5 years older, $1,750 rent will most likely either remain the same or decline because of being an older product.
>> $250K for 5-year term / 25-year amortization @ 3.0%:
monthly mortage payment is $1,183/m with principal and interest portions ranging from $562-651 and $621-533, respectively.
at the end of 5 years, $213,687 balance is outstanding.
in this example, $1,183 mortgage + $350 maintenance + $150 tax = $1,683; which is JUST under the $1,750 top rent you illustrated. again, the total cost of $1,683 has not included owners' property insurance and other auxillary costs, etc.
>> if in the next 5 years the rate goes up by 2% to 5% from 3%, $213,687 balance for 5-year term / 20-year remaining amortization :
monthly mortage payment is $1,404/m with principal and interest portions ranging from $523-961 and $667-738, respectively.
at the end of 10 years, $178,169 balance is outstanding.
$1,404 mortgage + $350+ maintenance + $150 tax (both which are sure to go up in the future) = $1,904+
and to repeat important details daveto stated:
your assumption has left out the following:
1. Acquisition costs (land transfer costs, etc).
2. Sale costs (if you ever wish to sell)
3. Vacancy costs. (it is unrealistic to presume 100% occupancy for eternity)
4. Maintenance/damage costs (at some point you'll need to fix something or replace something)
5. Special assessment condo fees (it happens to most condos at some time)
6. Management costs. (if you do this yourself, then you must factor in your time as a cost)
7. Finally, you have assumed 3% interest rates unchanged over the life of your mortgage. I trust you realize that is unlikely?
