Should I Buy This Investment Property?

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u/Monopoly · Joined Oct 2024

Is this property a smart investment, or should you stick with an ETF or mutual fund? Weigh the potential gains against the hassle of property management.

Last update Nov 2024
  • Scenario 1: Buy This Property
  • Scenario 2: Don't Buy; Just Invest
  • Which One Is Higher (%)

Check where the yellow line peaks—that's when you'll get the highest return on buying the property. If the yellow line stays below 0%, it's a red flag. Don’t buy; you’re unlikely to profit from this investment.

# Years from Now

Try your numbers:

Not the listing (asking) price! The final price is usually lower or higher than the listing price. Make your educated offer, based on market and property condition.

A =

How much you think this property will appreciate. This probably is the single most important financial factor to consider.

B =

Look at market rent for similar properties. How much do you expect to rent it stably? (If you're renting for rather short periods of time, make sure you account for vacancy.)

C̃ =

Property taxes, maintenance cost, insurance, utilities, etc.

D̃ =

How much you can put as Down Payment. Usually it's 20% in Canada, but in some cases it could be higher or lower.

E =

Use an interest rate for investment property.

F =

Usually, for investment properties, this is 30 years in Canada.

G =

Estimate a % of the cost of buying. (Title transfer tax if applicable, lawyer fees, initial vacancy, etc.)

H =

Staging, vacancy, agent commissions, lawyer fees, etc

I =

On top of your current income, for every dollar earned, how much you're obliged to pay to the CRA (and Revenu Quebec, if applicable). Use a tax calculator to find out.

J =
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  • Amount
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  • Cash Flow
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  • Percentage
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Time Value Assumptions

Heads Up!

If you're using Cost Basis (cb) for calculating capital gains:

Please be aware that very few countries currently use inflation-indexed cost basis. Double-check your local tax rules before publishing.

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How is Cash Value calculated?

Calculate the rental income and capital gain when selling the property at a future time.

Decisions / Expectations

(Expressions are evaluated at Year 0 only.)

K =
L =
0

Calculations

(Expressions are evaluated at every year.)

M̃ =
N =
O =
P =
Q =
R̃ =
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Add Decision or Expectation
  • Buy Asset
    Buy an asset growing at its own rate.
  • Take Installment Loan
    Take a mortgage, loan, etc.
  • Invest
    Receive/Spend a lump sum.
  • Expect to Invest
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  • Expect Monthly Cash Flow
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  • Expect Yearly Cash Flow
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  • Define Variable (Numerical)
    Calculate an intermediate value.
Add Intermediate Calculation
  • Define Variable (Numerical)
    Calculate an intermediate value.
  • Define Variable (Cash Flow)
    Calculate a combined cash flow.