Fourplex sold in July, it was located in the Westboro Neighbourhood

We have seen a number of multi unit residential buildings sell in 2018 with negative cash flows. This is based on a 35% down-payment.

In the early to mid 2000's an astute investor could purchase a building with a 20% down-payment and realize a positive cash flow. That changed almost overnight in 2008/09 when the equities market took a dive. Investors who previously never touched real estate now flocked to it in droves. That factor combined with historically low interest rates caused the price of multi unit buildings to jump in value as investors snapped them up.

How much would you be willing to pay for a multi unit building to achieve a positive cash flow?...

… 35%? 45%? Or is cash flow secondary in your criteria. This month take a look at the financials for another negative cash flow property.

Below is the table showing you all of the numbers on this sale, and it looks like the buyer is taking a loss and there could be a reason for that, like the buyer actually moved into One of the units as a live-in owner.

 

Westboro 4 Unit Building, Sold July 2018
Listed Price $950,000

Selling Price $929,000
Scheduled Rental Income (SRI) $49,300
Effective Rental Income (ERI) $47,328
Total Operating Expenses (TOE) $20,465
Net Operating Income (NOI) $26,863
Capitalization Rate (CAP) 2.9%
Operating Expense Ratio (OER) 43%
Sales Price X Net Income 34.6%
35% Downpayment $325,150
Mortgage (@ 5.5%) $603,850
Annual Debt Service (mortgage payments) $36,178
Cash Flow -$9,315
Return on Investment (ROI) -2.9%

Have a look at all of the Multi-Family Listings on our site, or get in touch if you want to buy or sell your building.