Real Estate Investors are increasingly finding it challenging to find Nanaimo Real Estate that still has the potential to cash flow while making use of financing to maximize their leverage.
This 1 bedroom, 1 bathroom condo located in desirable North Nanaimo is within walking distance to malls, shopping, restaurants, jobs, and public transportation. Offering 716 sqft. of living space with its own balcony, this unit is currently rented for $825/month and the tenant would be to stay making, making this a turn-key real estate investment opportunity.
Offered at $139,900, here’s a financial breakdown of what the numbers would look like:
Assumptions:
- Purchased for $139,900
- 20% down payment
- Financed on a 2.5%, 5-year, fixed rate, 25 year amortization, resulting in a monthly mortgage payment of $501
- Stata fee is $160
- Taxes (2016) are $1,012 annually / $84.33 monthly
- Vacancy allowance of 3%: $24.75 per month
- Maintenance allowance of 5%: $41.25 per month
Initial Investment:
$27,980 down payment
$1,399 land transfer tax
$1,000 lawyer fees (approx.)
$400 home Inspection (approx.)
$30,779 total
Income/Expenses (monthly):
$825 rent
- $501 mortgage payment
- $160 strata fee
- $80 property taxes
- $25 vacancy allowance
- $41 maintenance allowance
$18 total
Ultimately, your return on your $30,779 will have 3 components:
- Building Equity / Paying down the principal: At the end of 5 years, you will have paid the principal down by $17,193
- Cashflow: $18/mo. until rent is increased or costs rise. Vacancy rates are currently very low in Nanaimo, so if these factors persist, rents could be reasonably expected to continue to increase.
- Capital Appreciation: The exact timing of future market conditions is unknown, however, over time real estate values will rise. Over the past 5 years, condo values in nanaimo have increased approx. 16%, or approx 3.25% per year. If this trend continued, it would result in a property value of $162,284 after 5 years, a gain of $22,384.
Of course, none of these numbers are guaranteed as markets do go both up and down. However, taken together you can see that your principal paydown, cashflow, and capital appreciation, work together to deliver a potentially substantial return on the $30,779 initially invested in this scenario.
Although in this scenario we maximized the financing available for a rental property investment at 80% loan-to-value (LTV), a more sizeable down payment would only serve to increase the monthly cashflow. It should also be noted that the vacancy and maintenance allowance are not actual cash expenditures, but serve more as a safety net so that there are no unexpected surprises down the road - a prudent measure for all real estate investors to factor into their financial analysis.
With it’s prime location and cash flow potential, this North Nanaimo investment property is definitely worth a look. Please contact Real Estate Advisor Carlee Jahelka *PREC at 250-616-1020 for more information on 405-4720 Uplands Drive.
Note: All figures are approximate, used for illustration purposes and no suggestion of likely or guaranteed investment returns are being offered or should be relied upon.