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Friday, 30 November 2012 18:00

Show us Your Investment Property: High Park

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This look inside an investment renovation opens CREW's series "Show us Your Investment Property." As Jemima Codrington reports, finding the right location and picking the right upgrades to match can expand your ROI. We have the numbers to prove it.

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Video transcript below:

Jemima Codrington: This week’s episode of Investor Insight takes us to the affluent neighbourhood of High Park. We take a look inside an investment property that’s all character on the outside and modern city living on the inside. Welcome to this week’s episode of “Show us your Investment Property” on Crew TV.

J.B. Partners, Nam Phung and Paul Hecht bought the property for $700,000 back in September. The legal duplex consists of 3 units which have all undergone significant renovations that combine modern living with a property of distinctive character.

Paul Hecht: So High Park’s a great location in Toronto because it has High Park, obviously which is a huge park which people love. It’s got [Worres] Village for all the streets and coffee and shopping. It’s very convenient to downtown because it is also on subway line and you know chances of Toronto removing the subway line are very rare. So we like that, it brings those tenants in and it attracts the professional kind of tenant which is the kind of tenants we are after.

Unit # 1
So right now the guys have just finishing up the bathroom. We have extended it up, made it a little bigger. We have a kitchen behind us, this will be a one bedroom unit and we have bamboo flooring down, once we are all done. We will rent for about $1050 a month plus utilities.

Unit # 2
Nam Phung: Basically what we did, we knocked out the old kitchen and we put in the brand new kitchen with the new appliances. They look expensive but it only cost us a small fraction of what it looks and we hope to rent this place for $1550.

Unit # 3
Nam Phung: Okay so, basically what we did here when we bought this place and this was basically closed up. It had a room here and a room behind me. So what we did, we make it open, we knocked out the two walls and choose only a window and keep a fireplace and make an open concept. This is more attractive to a young professional or a couple because there is an openness in spaces and we hope to rent this unit for $2150 plus [hydro].


7 comments

  • Angela Zelvenschi Monday, 04 February 2013 18:55 posted by Angela Zelvenschi

    There is no such house that has been bought in 2012 for $680,000 as there is in comment; or not the same house for $700,000 as we seen on video; in 2012 in High Park area.

    Maybe they found some private deal?! Means this property has been bouth for so much below the market price. I want those Owner who are willing to loose their own money. Really want.

    "We purchased the property for $680K + $21K in closing costs = $701K total purchase"
    "Mortgage payments at 3.7% on a 5 year term = $3,155"

    To resive these numbers you have to have mortgage for $860,000 ($688,000+20% Downpaymet).

    Now for it comes $860,000 +$21,000 in closing.

    WOW - that is Toronto. Land Transfer Tax only will be $26,600: plus Lawyer's fee which will be around $1,500 + home inspection around $450 min.

    Property taxes in the area for such house is $4,500-$4,900 per year

    Management fee in Toronto are 10% +HST. 3 units have been leased in total for $4,750. It doesn't look for me $225

    Renovation for $80,000? 3 new kitchens+appaleincies: 3 new bathrooms, new windos, doors, flooring...that is is 100 YEARS OLD HOUSE! who did renovation in old house knows what i am trying to tell you.

    Did you do renovation in 90 days? OK. Did you pay for that time your mortgage, your property taxes, utilities...? Where those numbers in culculations?

    Would you pay commision for the agent who brings you a tenant?

    I real investment usually is 1-2 months vacancy.
    OK, this list never ending.

    Every number from this video looks as a dream for me.

    Angela Zelvenschi

  • jay Wednesday, 23 January 2013 18:14 posted by jay

    This just way too expensive to get into something like this, try cities like vegas, phoenix, and atlanta. Property taxes are ridiculous in Toronto, better off moving somewhere warm.

  • Paul Hecht Monday, 21 January 2013 10:22 posted by Paul Hecht

    Alternately, if we did not want to refinance and hold, we could have just flipped it and made approx 21% cash on cash in less than 180 days. Annualized that's 42%.

  • Paul Hecht Monday, 21 January 2013 00:50 posted by Paul Hecht

    Just wanted to clarify – here are the actual quick numbers for the pessimists.
    We purchased the property for $680K + $21K in closing costs = $701K total purchase.
    We spent $80K on renos and it took 90 days including a brand new roof, all new windows, new deck, 3 new kitchens, 3 bathrooms, engineered hardwood floors, paint, light fixtures, etc, etc. All done by a contractor - not us.

    It was appraised by a conservative bank in Jan 2013 for $860K.
    We refinanced 80%LTV of $860K for a $688K new 1st mortgage, meaning that we got back approx. 65% of our initial down payment, closing and reno costs back from the refi.
    Therefore, we have 10.9% of the total property value of our own cash remaining in the property or, $93K on $860K value = 10.9% Cash to Value.

    Mortgage payments at 3.7% on a 5 year term = $3,155
    Property taxes = $335
    Insurance = $150
    Vacancy allowance = $144
    Maintenance = $244
    Utilities = $80
    Management = $225
    Misc = $60
    Total monthly expenses = $4,393

    Our total gross rent is $$4,800

    Cash flow = $407/mo = $4,884/yr = 5.2% ROI
    Mortgage pay down is approx. $16,800/yr = 18% ROI
    Not including any appreciation – our ROI is 23.2%.

    I think Real Estate is a little better than a GIC…IF you know what you are doing:)
    Thanks, Paul Hecht

  • vinnie Saturday, 19 January 2013 15:14 posted by vinnie

    @Peter ... nicely put. I think people don't understand the numbers before it's too late.

  • Larissa Doherty Friday, 18 January 2013 17:38 posted by Larissa Doherty

    This is not a real estate investment. In fact, this property should not be highlighted at all. So much money would have to be put down to make this cash flow that it doesn't make any sense to own this property. (Plus even more money went into the renos...) There are much better real estate investments out there - and much better ones to highlight in a real estate magazine!

  • Peter Stevenson Tuesday, 18 December 2012 23:45 posted by Peter Stevenson

    Assuming the property is assessed at the purchase price stated… $700,000 (i.e. they didn’t overpay and the assessment doesn’t bother to take into account renovations they have made) Taxes will be $5398.39/ yr or $449.86/mth… let’s call it $500/mth just for fun…. And let’s pretend all those renovations didn’t cost them a dime! So $700,000 was the total investment…Assuming the structure will last 50 years…a stretch for most stuff like roofs, plumbing, electric, appliances, windows and doors… etc…but lets just say…. So $700,000/ 50years is $14000 a year…. Ok, so the land has value and won’t wear out …so lets say less than half that amount…how about $6000 per year in maintenance and replacing things when they wear out…heck I spend this on my place and I am an owner and take care of my stuff really well…not like a tenant… but let’s just say your tenants will look after your stuff like their own…that is $500.00 per month…now assuming none of the tenants EVER move and you never have a vacant place EVER…. And there is never any damage and you have a GREAT insurer who just charges you $2400 a year for fire and liability (call me right away!)…. And it never goes up for the next 20 years… Lets just say… and let’s pretend that although the landlord tenant act dictates what you maximum rent increase can be…let’s pretend that rents keep pace with inflation and all of your increases in costs… it never has before…but let’s pretend you are the exception to the rule… and finally lets say that you amortize the place over 25 years and lock in over 10 years… The TD will give you a ten year locked in rate of @ 6.75% as at Dec 2012(they assume rates will rise over the next ten years and so should you!) and let’s say what ever down payment you make you would like to be paid back to you at the same rate your bank charges you (seems fair doesn’t it?) Then the mortgage cost/repayment to you of your down payment is $4795.35/mth. Who needs a cash flow surplus that is just greedy…and surely you will never have an unexpected expense… and remember any increases in expenses will be fully offset be rent increases ..lol
    OK… now let’s do some math …your gross rent for the next 10 years will be roughly $ 4750.00/mth… if you are able to achieve the projected rent figures (which are about 30% over similar properties in the neighbourhood are currently going for) and not counting any other factors (like calls at 3 am for toilets backing up etc) and assuming your tenants pay in full and are on time all the time and never vacate for the next 10 years . Your costs are roughly $6000/mth leaving you short a little over $1300/mth for the next ten years or roughly $156,000.00 …of course you will likely make that up in appreciation…well except if all the experts are right and property values decline 10-15% in the next couple of years…oops..
    Oh well investing in real estate is fun… however personally I think I will put my cash in a GIC and be pleased with 3% a year if this is the best alternative….
    You can make money in real estate…but this is NOT how… anyone who tells you it is …is either a)lying to you in order to benefit themselves or B) a moron …you decide…

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