Purchasing Investment Properties

Deciding whether it's better to invest in the Stock Market, GICs or investment properties has always been a no-brainer for me.

The stock market goes up and down, sometimes you can look back over your initial investment 10 years ago, and there were two crashes, and you are right back where you started. Hardly a good return. If you sold your stocks during a low period, then you even lost money. GICs have some guarantees, if you think a 1% return is good.

Investment properties come in many forms. In real estate, the most commonly sold investment properties are duplexes, triplexes and fourplexes. Larger multi-unit properties sell, but are less common, mainly because there are fewer of them. Most times the investors that own them want to keep them.

Let's say you have $ 40,000 to invest in a duplex, which you paid $200,000 for; leaving you with a $160,000 mortgage. And you have two tenants, both paying around $ 1,000 per month each. They pay their own utilities, and you're paying property taxes. Here's a general overview of the situation:

Total income = $ 24,000

Total Mortgage PI = $ 10,099.56 ($ 160,000 at 4% = $ 841.63 - amortized over 25 years)

Taxes - $ 3,000

Insurance - $ 1,000

Total expenses - $ 14,099.56

Net Income - $ 9,900.44

This net income is a return on an initial investment of $ 40,000 - A return of 24.76%. Not bad!

This example is a positive situation, that the units are rented, that the tenant pays heat/lights, and the building is in good shape, and also that interest rates are at 4%. BUT at 24.76% return, even as interest rates start going up, investment properties of this nature will still win out for quite a few percentage points.

One other significant point that I haven't mentioned yet: The tenant is paying your mortgage. So, while you are making a bit of return on your initial investment, your property is being paid for and it is also appreciating in value.

Kevin Stacey is a sales representative with Century 21 Annapolis Valley Realty in Kentville, Nova Scotia.

1 Comment

  1. heesuk baek 06/07/2010 at 11:39 PM

    i am korean-australian. i am living in sydney now.
    i have lived in vacouver for one year. i like cananda.
    also i am interested in investment property in canada or usa.

    could you give me advice..

    1) can i buy property in canada?
    2)can i get mortgage in there?
    3)what is current mortgage intereste rate?
    4)how much i should pay tax
    5)any other special things for oversea investor?

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