Whether rent is residential or commercial you need to look at what kind of a return you need to make on the investment. The income less utilities, taxes, insurance and an estimate of the maintenance (which depends on the condition of the property), in addition to allowing a certain percentage of return annually beyond your costs. We like to see at least a 12% spread between our income and our costs after financing the property. Be sure to allow enough cashflow to cover the difference between your income and how much principal you are required to pay back each period. When determining if an investment is viable, we endeavour to have the monthly rent cover the triple net costs and the interest and hope that we have evaluated the property well enough to have a net cashflow after maintenance. This generally means you are paying yourself to do the maintenance. If you are looking at trades for most things, you are likely going to be in the whole. As always location, location, location. If you have invested well, over the course of time your rents should increase to provide a reasonable income in addition to carrying your costs.
Mar 29, 2017