Investing in a multi-unit properties? Take care…
Recently, I noticed something very strange happening with multi-unit properties and I want to share two experiences with you…
I was approached to refinance 2 separate and different Multi-unit properties by 2 completely different borrowers. Both properties were in the Greater Toronto area. They were both in great condition and were bringing in good rental income.
Property 1 was purchased in 2008 for $385k. There are 3 legal rental units. It generates good rental income of $3700/month. The owner paid utilities.
Property 2 was purchased in 2006 for $610k. There are 3 legal rental units. It generates rental income of $3400/mth…. The tenants paid utilities…(it should be noted that Property 2 is in a more expensive part of town where real estate prices are higher).
Fast forward to today…. Based on current appraised values, Property 1 is currently worth $460k, Property 2 is currently worth $660k. Keep in mind that these are actual rents for both properties.
So how can this happen? It’s clear to me… the buyer’s of Property 2 overpaid in 2006….Property 1 is in a less expensive part of town but the rental income and condition of the property are more relevant when dealing with investment properties….
How can you avoid this mistake? Seek out the help of a good Mortgage Broker… A good broker can seek out the opinions of a recognized real estate appraiser… and even crunch the numbers with an experienced Lender to determine the property’s Lending Value…
As an aside, the average sale price of a single family home in GTA in 2006 was $350k…. today, it’s around $427k. Multi-unit dwellings can be attractive but consider single family homes if you want to invest in real estate. Always discuss the purchase with a trusted group of advisors… including your Mortgage Broker.
Steve Garganis View All
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.
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