London Ontario Real Estate

Welcome To My London Ontario Real Estate Web Site
Welcome to London Ontario Real Estate Sign in | Help

London Real Estate & MLS Listing Info

London Ontario Real Estate Blog

Closing cost analysis & single-family versus multifamily investment properties

 I thought I would post this e-mail I sent to buyer from Tel Aviv Israel who is looking to purchase investment properties in London.  Recently I have been getting increase and working with people from all around the world who are looking to purchase properties in London.  The reasons they mention for being interested in our fair city and surrounding area is that it's a very stable market , the vacancy rates are low and the prices versus income compared to other areas of Ontario are very attractive to them.  As well I have dealt with buyers recently from other parts of Canada, notably Western Canada.

Greetings

 

The following summary is based on the purchase of a $215,000 building in London under two years of age. The first set of costs would relate to the actual purchase cost and the second would relate to the ongoing annual expenses. Although I put a dollar figure in for maintenance but considering these homes are approximately 2 years old maintenance should be very little for the first few years.

Property management can be 6 or 7% or anywhere from one month rent to 1 1/2 months rent.

My fee is usually paid by the seller.

 

Closing Costs

 

 

Land Transfer Tax                                                      $ 1875

Lawyers fee and disbursements                              $ 800                     

Home Inspection ( optional )                                    $ 400

Mortgage Fees depend on the company

and may be waived by some.

Title insurance                                                            $ 500

                                                                                      $3,575

 

 

Expenses & Pro Forma

 

 

 

House insurance                                                    $ 400

Vacancy

5% of $1200 a month times 12

multiplied by 5% equals                                       $720

Property Tax                                                           $2279

Maintenance investors typically have

different numbers or percentages

for analysis purposes                                          $ 500

Property Management                                          $1200

                                                                                $ 5,099

monthly rent $1200 x 12 =  $ 14,400 -  $ 5,099 (expenses)  = net income of approximately $9301 yearly before mortgage and income tax

 

 

In regards to which is the better option a multifamily unit renting to students or newer single-family homes... a tough question !

I would say it probably boils down to more of a preference versus which is better or less risky. If one can find a multifamily unit close enough to say the University of Western Ontario or Fanshawe College you vacancy rate should be relatively low to nonexistent. However your maintenance costs and management expenses would be considerably more. Which of the two would have a better appreciation or price increase or the years? Again really tough question, it would depend on where you are in the real estate cycle I have seen new homes that we have built(I work with a builder) gain as much as $20-$30000 in one to two years. As well I have seen investment properties jump in price rather steeply over short period of time, depending when you're looking at the price graph.

However most wise investors look at real estate as a long-term investment and as such I would say the two options are relatively equal. If I was going to speculate which is always a risky endeavor I would say homes that are being built new at present have the best chance for short-term appreciation if one knows where to look.

I hope the above answers your questions, if you have any other requests for information on any property please feel free to e-mail me .

I look forward to meeting and working with you in !

Regards
Jim Straughan
Sales Representative
Century 21 First Canadian
voice 519 641 4355
Email jim@straughan.ca
London & Middlesex Real Estate
www.straughan.ca

Published Wednesday, January 16, 2008 6:27 PM by Jim Straughan

Comments

No Comments
Anonymous comments are disabled

This Blog

Syndication