toronto real estate market

How To Make A 26.1% Return Investing In Real Estate In One Year

Posted by neil on December 13, 2016
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Hi There,

I hope you are doing well.

In today’s blog post, I am going to walk you through how you can make a 26.1% return on your money investing in real estate.

I recently recorded a PODCAST called, 3 Reasons Why Buying A Rental Property Is Better Than Investing In The Stock Market.

In this PODCAST, I talked about 3 ways in which you can make a ‘return’ buying and holding real estate.

These 3 ways were:

Cash Flow

Mortgage Paydown

Property Appreciation

To illustrate to you how you can make this type of return on your capital, I am going to take the same example I spoke about in the PODCAST.

Let’s assume that you are a new real estate investor and you are interested in buying your first rental property.

You purchase a property for $450,000.

Let’s assume that you are purchasing a property in the Toronto or Greater Toronto Area real estate market.

As such, you provide a 20% downpayment to purchase the home, which equals ($450,000 * 20% = $90,000)

Therefore your downpayment is $90,000.  Don’t forget this number.  We will re-visit it later…

The property produces a $500/month net cash flow. (This is on the high side for Toronto, but I am using easy math to help illustrate this example)

You annualize your cash flow by multiplying $500 by 12 months.  This gives you ($500 * 12 = $6,000)

Therefore, you have $6,000 annual cash flow from the property.

Since you have provided a $90,000 downpayment, and the purchase price of the home was $450,000, this leaves you with a $360,000 mortgage.  ($450,000 – $90,000 = $360,000)

Now let’s assume that you obtain a first mortgage in the amount of $360,000 at a 2.5% interest rate and amortized over 30 years. (What is Mortgage Amortization)

Using a mortgage calculator, we can figure out that your monthly mortgage payment would be $1,422/month.

Now here is where we use some creative math.  Let’s assume that 50% of your monthly mortgage payment of $1,422 is principal, and 50% of the payment is interest.

If you use a mortgage calculator for this, you will see that the breakdown is not actually fifty-fifty.  However, I am using 50% just to make the math easy.

As such, 50% of $1,422 is $711.

This means that the mortgage amount of $360,000 is paid down by $711 each month.

We want to know how much the mortgage is paid down annually (or at least in the first year), so we take $711 and multiply it by 12 months, which gives us $8,532.  This number is also important.  We are going to re-visit it shortly.

If the property that you purchased for $450,000 appreciates at 2%, that would mean that the property would go up in value by $9,000 in the first year.  We get this number by taking $450,000 and multiplying it by 2%.

I am using 2% as an extremely conservative figure.  The real estate market in Toronto and the Greater Toronto Area has far surpassed this figure over the past several years.   

So now we take our return on our capital from year one.

We have $6,000 annual cash flow

We have $8,532 annual mortgage pay down

And we have $9,000 property appreciation in year one.

Now we add up all of these numbers…

$6,000 + $8,352 + $9,000

This equals…

$23,532

We now take this amount (the total amount you have made in year one), and divide it by your initial investment of $90,000. Which gives us…

$23,532 / $90,000 = 26.1%

So as you can see from the math above, you can make a 26.1% return on your investment (in year one) by investing in real estate.

 

Happy Investing!

-Neil

 

 

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3 Reasons Why Buying A Condo In Toronto Is The Worst Investment You Will Ever Make

Posted by neil on December 09, 2016
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Hi There,

I hope you are doing well.

If you are a new real estate investor looking to buy your first rental property, it is crucial that you make smart financial decisions as you navigate the Toronto real estate market.

It is important for you to know that buying a condo in Toronto can be a REALLY bad investment.

It can be a terrible investment if you don’t know what you are doing, and if you forget to do 3 major things…

To find out the 3 reasons why buying a condo in Toronto is the worst investment you will ever make, you can listen to my PODCAST, by pressing on the “play” button below.

Happy Investing!

-Neil.

 

 

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How To Find A Tenant For Your Toronto Condo

Posted by neil on December 08, 2016
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Hi There,

I hope you are doing well.

If you are a new real estate investor looking to buy your first rental property, there are 2 things I would recommend to you:

A) Consider purchasing a condo in Toronto.

B) Listen to my new PODAST called, HOW TO FIND A TENANT FOR YOUR TORONTO CONDO.

You can listen to this PODCAST by clicking on the “Play Button” below:

 

The reality is that Toronto condos are a property type in which new and experienced investors are placing their money.

The Toronto real estate market is a great place to invest.

I have personally invested here, and plan to continue investing in the City of Toronto.

I hope you enjoy the PODCAST.

Happy Investing!

-Neil.

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Toronto’s Middle Class Is About To Be Priced Out Of The Condo Market

Posted by neil on December 05, 2016
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Hi Folks,

I hope you are doing well.

With real estate prices rising to record levels in the Toronto area, some people are beginning to speculate that condos will soon be priced so high, they will soon be out of the reach of the average buyer.

Could this actually happen?

Seriously, could condo prices rise high enough, that the majority of people will not be able to buy one?

In my personal view… it could happen.

Daniel Tencer of the Huffington Post writes,

“Single-detached home prices in the city of Toronto jumped by 32.3 per cent in a year, and now average $1.35 million. In the surrounding 905 region, detached homes jumped 25.5 per cent and are now on the verge of hitting the $1-million mark, at $957,517.”

For those of you that are not familiar with the Toronto area, the “905 Region” consists of cities surrounding the City of Toronto.

In his article, Daniel mentions that as real estate prices continue to rise, single detached homes remain far out of the reach of most of Toronto’s first time buyers.

Further, Daniel states that:

“Prices for condos in Toronto jumped 13.5 per cent (since 2015) to $471,256.”

Not only did condo prices jump in Toronto, they also went up in price in the “905 Region”.  According to Daniel:

“…the average condo there (in the 905 Region) jumped 18.9 per cent in price in the past year, to $374,792.”

So what does this all mean?

It could mean that Toronto’s home ownership rate is going to start to drop, as some experts have predicted already.

Just take a look at this.

This is the “Average Annual Toronto Sale Price” dating back to 1970.

 

average-annual-toronto-mls-sale-price

 

If prices continue to rise in this manner, as you can see in the chart above, this will result in more people becoming renters for life, unless a major correction in price occurs.

This is where the opportunity lies.

If there is one piece of advice I can give you, it is this…

BUY A CONDO IN TORONTO NOW !

Condos are still affordable and they are a great investment for new real estate investors, looking to buy their first rental property.

Or, they can be a smart investment for the veteran real estate investor, looking to purchase his/her 4th property.

The tenant profile (as long as you do your due diligence) is excellent in Toronto.

I own condos in Toronto myself, and they have been a fantastic investment.

But Remember…

Don’t delay.

Buy now and prosper.

If not, you may become a statistic.

You may be priced out of the Toronto real estate market, like so many other people who did not take action.

 

Happy Investing!

Neil

 

 

 

 

 

 

 

 

 

 

 

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