Let''s talk numbers.
Let''s use this triplex currently on the market as an example. Not exactly the same property parameters as what you''ve listed, but it has 3 2-bedroom units, so feasibly for small families.
https://www.realtor.ca/Commercial/Multi-family/16575449/853-Russell-Street-Brandon-Manitoba-R7A5G3
The asking price is $564,900. Let''s assume you can purchase it for about $550,000.
Commercial/investment properties usually need at least 20% down, so let''s assume I''m going to leverage another property I already own (my primary residence, for example) for the down payment. I''m going to need about $110,000 down, and mortgage the rest. Keeping numbers simple (not counting land transfer taxes, lawyer fees, fees to the bank for the mortgage, not outstanding repairs are needed, etc), let''s assume you can get a 3% mortgage on the property for 20 years on the balance of $440,000. That''s giving you a payment of about $2400 a month in mortgage payments to the bank for the next 20 years on your investment. That works about to be about $800 a unit (3 units).
According to the city''s website, that property has a net taxes of $5281 per year. That''s about $440 dollars a month, or about $146 a unit.
So, just to pay the mortgage and keep the city happy with taxes, I''m shelling out around $950 per unit.
Now, I need to charge enough to cover damages the tenant may cause. Even very responsible tenants put wear-and-tear on the units: that''s just life. We''ll add in a modest $200 buffer for the wear-and-tear/damage/blown hot water tanks, etc. That very modest - a single blown hot water tank could eat up a year''s worth of buffer on a unit. But that $200 added to our $1150 brings us to $1350 for a 2-bedroom unit. And the investment property hasn''t even turned a profit yet.
Now, that''s simplistic I realize. Many properties are not mortgaged to the max and have been paid down. Some older buildings may pay less taxes, but may require more maintenance. We haven''t accounted for any taxes on the income generated on the property that the owner will need to pay. The owner's mortgage on his primary residence will increase because he's taken equity out of his own home to purchase this investment property. The building will need ongoing maintence over and above the $1200/year per unit already factored in. But in that particular building, in that particular instance, a 2-bedroom unit will likely not rent for less than $1350. That''s very easily a mortgage payment and taxes on a modest house.
Edited by Abbysmum, 2016-07-02 17:59:59