Closed My First Property

I am very excited to announce that I have closed my first property!

I am in the phase of firming up the deal and I see absolutely no reason for the deal to fall through. My property is a 1 bedroom + den condo in the heart of a developing city. Although I would have preferred to get a 2 bedroom, the den in this unit is quite large to be considered a bedroom of itself.

Personally, I think this is an excellent investment property but I may be wrong. I guess I will have to wait and see. Here are the details to my investment property:

More information on my property

As mentioned, my property is in the downtown core of a developing city where shopping, transit, education and emergency services is highly convenient. Additionally, transit projects and a university is scheduled to be built by the year 2020. Especially since my property will be walking distance to the University, rental to student could be a real possibility in the future.

The closing cost for my property amounts to $290,000 not including the closing cost and taxes. This appears to be an extremely good deal especially since units in the same building with exactly the same layout is going for $310,000 to $315,000. With the seller desperate to move into his new property, I got his old one at a slight discount! J

As for the building itself, it is 8 years old with concierge, a swimming pool and all the amenities that is included in most modernized condominium. My unit also comes with a parking spot which I plan on renting out too.

Mortgage is in order

I will be putting a 20% down-payment on this property on closing day and my mortgage has already been approved. I got a pretty decent rate at 2.44% on a five year fixed at a 30-year amortization.

I opted for the 30-year amortization because I plan on renting this unit out. The low monthly payment makes it easier for me to cover my expenses and even possibly profit through the rent. Unfortunately, being stuck on the 5 year fixed means that should I decide my property within 5 years, I will have to pay a hefty penalty to opt out.

Renting out my unit

The plan right now is to rent out the unit to my aunt who is currently residing in the same building. Her lease would be completed near the end of the year. This would give me a couple of months to venture my own independence and maybe do some fixing up.

The worst case scenario would be that my aunt does not move in and I would have to find some tenants myself. With that area in high demand, I am confident that I can find myself a tenant. It’s just a matter of setting the right price and drawing up the contract. In any case, I am pretty sure that the rent would be enough to cover the mortgage, maintenance fee and possibly even the property tax.

A 20% return investment

After some quick calculations, I can expect that this investment could provide me a return of roughly 20% to 25% annually.

The initial investment cost would be the $60,000 down payment. Assuming that my unit is rented out to either my aunt or another tenant, mortgage would pay for itself. As my mortgage is roughly $1000 a month, that would equate to an equity of $12,000 a year. All which will be returned to me when or if I sell this unit.

Don’t worry, I have taken account all the costs of selling such as realtor, lawyer and closing costs. This should all be covered when I sell especially since I got this unit at a discount. I may even end up selling at a profit and that could be added on top of my $12,000 per year equity. Of course, this is all assuming that my property appreciates and that I don’t sell when the housing market crashes!

The next step

In the meantime, I will patiently wait for the closing cost and continue to crunch my numbers. Sadly, with this investment, I will most likely be out of the stock market for a few months until I can replenish my TFSA.

I will continue to provide updates and more details on this endeavour at a later time. I also plan on posting some pics of the unit when I move in!

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8 Responses to “Closed My First Property”
  1. Dividends Down Under August 18, 2016
    • Jeff August 23, 2016
  2. Roadmap2Retire August 30, 2016
    • Jeff August 30, 2016
  3. Vivianne October 16, 2016
    • Jeff October 16, 2016
  4. J Scott January 22, 2017
    • Jeff January 23, 2017

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