What type of return on your investment can you expect when buying an Income Property in Ottawa?
We look at Two recent sales. One is a 15 unit apartment building in Sandy Hill, and the other is a Triplex in Centretown.
We break down the numbers for you, to show you how much cash you would put in your pocket at the end of the year. We are basing both of these sales on the buyer putting 35% towards their downpayment and obtaining a Mortgage with a rate of 3.2%.
Although these 2 properties are very different, as an Investor you can look at the Cap Rate as well as the Return On Investment, or the cashflow that you receive at the end of the year, to see if this is the type of investment you are looking for.
The table below gives you all of the numbers on both properties to compare. Their selling prices were much different, but you can see the main figures, like the cashflow and Cap Rate, as well as the final return on your investment at the bottom.
|Property & Location||
Triplex in Centretown
15 Unit in Sandy Hill
Scheduled Rental Income
|Total Operating Expenses||$23,492||$60,688|
|Net Operating Income||$32,380||$127,892|
|Operating Expense Ratio||42%||32%|
|Annual Debt Service||$33,946||$109,383|
|Return on Investment||0%||1.8%|
From the table above, the Operating Expenses stand out, the 15 Unit Building is at 32%, which is pretty low, while the Triplex is at 42%. That means that 42% of the income goes towards the expenses.
Also note that the Cash Flow for the Triplex is Negative, while the Centretown property has a cash flow of $18,509 per year.
At the end of the day, the Return On Investment shows the 15 unit having a 1.8% return, while the Triplex shows a 0% Return on Investment.
The buyer of the Triplex could have put more money down, to see some positive cash flow, but for this comparison we used a standard 35% as their downpayments.
Also remember, both purchasers will have appreciation accruing on their property.
Check out some of our other blog posts covering the Multi-family market here.