The power of 10

Do you want the secret for how I find such amazing positive cash flow rental properties? Well this month’s article is all about one shockingly simple formula that once you're tuned into, things become almost ridiculously simple.

The simple rule I am referring to is the 10 times rent-multiplier. The best part of this formula is how easy it is to do in your head, which allows you to instantly analyze the positive cash flow potential of any Kelowna property for sale, anywhere. I will share 10 great examples of properties that fit this formula to eliminate any doubts that you may have.

First let me explain the formula;

Take the annual rental revenue for a Kelowna investment property for sale, and then multiply it by ten. That’s it, the entire formula! The number you now have is what you want the property price to be equal to or awfully close to if you are considering it as an investment property. For many people especially ones that have rental property that falls way outside this rule of 10 don’t leave me just yet, please allow me to show you some real world examples:

 

1.  5-plex in Enderby listed at $369,000

• rents are 36,000/year
• $36,000 x 10 = $360,000
• Net cash flow = $ 1004 /mo

 

 

 

 

2.  5 bed House with legal suite purchased at $312,000

• rents $31,000/yr
• $31,000 x 10 = $310,000
• Net cash flow = $ 981 /mo

 

 

 

 

3.  Condo at Discovery Bay listed 339,000

• Rent $35,000/yr
• $35,000 x 10 = $350,000
• Net Cash-flow = $1083 /mo

 

 

 

 

4.  Half Duplex with in-law suite purchased $240,000

• rents are $24,000
• $24,000 x 10 = $240,000
• Net cash flow = $810/mo

 

 

 

 

5.  2 bed Condo in Alexis Park Purchased $70,000

• rents are $7,200
• $7,200 x 10 = $72,000
• Net cash flow $318/mo

 

 

 

 

6.  Side by Side duplex with in-law suites purchased $484,000

• Rents $48,000/yr
• $48,000 x 10 = $480,000
• Net Cash flow $1398/mo

 

 

 

 

7.  Side by side duplex in Rutland purchased $360,000

• rents are $36,000
• 36,000 x 10 = $360,000
• Net Cash flow $1107/mo

 

 

 

 

8.  House in Phoenix Arizona purchased for $160,000

• rents $16,500
• $16,500 x 10 = $165,000
• Net cash flow $527/mo

 

 

 

 

9.  Condo in Scottsdale purchased for $118,000

• rents $12,000
• $12,000 x 10 = $120,000
• Net Cash flow $ 456/mo

 

 

 

 

10.  House in Fort Mac Murray listed for $750,000

• rents $72,000
• $72,000 x 10 = $720,000
• Net cash flow $2065/mo

 

 

 

 

The last few I included to illustrate the point that things fall into this factor of ten in all the hottest markets you've been hearing about, up north or down south. Most people are led to believe that these fabulous positive cash flowing investments are only if you are brave enough to invest someplace far far away. I’m here to tell you that the above examples are all real, and there are dozens more I could share with you. The bottom line is, they exist and with bank rates now under 3% for fixed term mortgages, the cash flow picture keeps getting sweeter. Let me illustrate for the fellow number geeks out there:

 

$360,000 Purchase price

$288,000 mortgaged

$ 72,000 invested in cash

 

$36,000 rent

$14,400 mortgage

$ 2,400 taxes

$ 1,400 insurance

$ 1,440 Vacancy (4%)

$ 2,160 Maintenance (0.6%)

 

$ 14,200 Net cash flow

$ 6,000 mortgage pay down

$ 20,200 per year in profit

 

Buy and hold this property for 5 years and let's see what we get for results:

• Mortgage reduction $32,084
• Positive Cash-flow $72,000
• Total gain $104,084
• Gain is 70% without factoring in any property appreciation.

 

Now this is obviously an overly simplified way of valuating a rental property, the long handed way of doing it, is to take the net operating income and divide it by prevailing market CAP rates at the time. This requires a thorough analysis from your professional Kelowna Realtor once you’ve decided to pursue the property.

For an updated list of Kelowna real estate for sale that cash flow well from day one please don’t hesitate to reach out us at any time.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.