Sunday October the 22nd, 2017 

TEAMJONAMANTE: *Jon*Sylvia*Mehdi*Cliff*Neil  *Sales Representatives

REMAX Realtron Realty Inc. Brokerage

Independently owned and operated

2815 Bathhurst Street, Toronto ON, M6B 3A4

Direct: 416-543-8852

Office: 416-782-8882

Toll Free Fax: 1-866-513-2193

Fax: 416-782-3329

Real Estate Investing: A Win-Win For You and Your Partner - Your Bank?

March 8, 2015 - Updated: March 10, 2015

Me? Partner with my bank? How? Can’t be….

 

For a minute, please humour us and go along with this scenario:

 

  • An investment property/ condo unit in the Bay corridor of downtown Toronto

 

  • Purchase Price (including closing cost) at pre-construction: $278,000: One bedroom, approximately 613 square feet, no parking, no locker.

 

  • A down payment of 20% of the purchase price: $74,799

 

  • A mortgage for 80% at 2.79%, 25 years Amortization: $203,925

 

  • Monthly Rental: $1,850 or $22,200 per year

 

  • Monthly Expenses (Taxes, Condo Fees, Insurance): $559 or $6708 per year

 

  • Net Operating Income per year: $15,492

 

  • Debt Service/Mortgage Payments: $944 per month or $11,328 per year

 

  • Cash Flow:  $4,464 per year or 5.96% on your total investment of $74,799.

 

5.96% doesn’t sound so exciting as your money may do better in other investments.  But wait, there’s more…

 

  • Your tenant is paying down your mortgage: $5,446 goes to interest but $5,882 goes to principal

 

  • Total Return:  Cash flow of $4,464 + Debt reduction of $5,882 = $10,346 

 

OR

 

  • 13.83% return on your actual investment of $74,799…now, that’s better!!!

 

 

Wait…here’s more…

 

  • Assume that you rent it out for 5 years. Mortgage balance by the end of 5 years will be $173,595 so you've gained $30,330 with your tenant paying off the mortgage of your property. This is a return of 41% on your initial investment of $74,799.

 

  • Assume that properties in downtown Toronto increase by 5% per year after the initial jump to $420,000. By the end of 5 years, the value of your property would be $536,000,  leaving you with a profit of more or less $195,000 from appreciation, mortgage pay down by tenant and small positive cash flow of $22,320 for 5 years.

 

Not bad for an initial investment of $74,799!!! What do you think?


Tagged with: real estate investing
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