Originally Posted by Senator
Definitely not good enough for a property investor. It may be OK for an accidental landlord. The risk premium is not accounted for. Most investors require 12%+ returns for a rental, even then it's difficult. A flipper needs even higher.
But if it works for the OP, that's OK.
I got those returns five years ago (accounting principal paid and money in my pocket after tax), and i can still get those returns buying new properties with 20% down payment ( my math is around 12%)
House price= $200K
Down payment =$40K
Mortgage rate= 3%
Monthly Mortgage payments=757
Prop tax $1500 (year)
Insurance $1000 (year)
Monthly rent $1350
Money in the pocket before canadian tax $4613
Money in the pocket after canadian tax $1000 (tax is calculated over interest paid)
Equity=$4500 ($160k original minus balance after a year ($155.5K))
Invested $40 as downpayment (plus lawyer/transfer fees), with a5.5K return that translates in a 14% ROI after paying all taxes.
My problem is that almost all of that gain comes from capitalization of the house with no much liquid money.
The only way to have liquid money is not owing to the bank, or with a line of credit and paying interest (that translates in smaller return)
That plan worked for me to increase my capital, but now that i am thinking in retire i am looking for other options