Ryan Price - Realtor with a passion for income properties - Latest Comments

Re: How to Calculate Cap Rate on Real Estate Investments

Ryan Price — Wed, 09 May 2012 14:48:30 -0000

Using final price is a fair argument. End of the day, as long as its consistent across what you are comparing you will be fine. $25k in closing costs seem very high to me as a buyer. I would argue they are normally closer to 1 or 2% of purchase cost.

Re: How to Calculate Cap Rate on Real Estate Investments

S_a_imam — Wed, 09 May 2012 14:45:58 -0000

Sorry, there was a typo it should be $370,000 final price

Re: How to Calculate Cap Rate on Real Estate Investments

S_a_imam — Wed, 09 May 2012 13:11:20 -0000

Is asking price is correct . It should be final price that includes closing cost normally varies between 5% to 10% more than asking price. Recently i purchased a house costing $345,000
ends up in 270,000 with closing costs added.

Re: How to Calculate Cash Flow

Ryan Price — Thu, 01 Mar 2012 15:17:46 -0000

Happy to help Shelly, best of luck!

Re: How to Calculate Cash Flow

Shelly — Mon, 27 Feb 2012 16:44:53 -0000

I cannot thank you enough, Ryan, for the wealth of information you provided so thoroughly in your blog. I am thankful, also, for the links you provided to further sound information. For now, I have assembled all of the information and printed it for taking my time to read through all of it soon. Thank you for caring enough to share your comprehensive knowledge and your experiences along the way. They are all INVALUABLE.

Re: Price-to-Rent Ratio – What is it and how can it be used?

Ryan Price — Thu, 19 Jan 2012 14:17:50 -0000

When you're personally making a decision like buying in Durham region vs renting a downtown condo the price-to-rent ratio isn't really relevant.

What it takes into consideration is the average yearly cost of owning vs renting the same house, so it doesn't factor in things like travel time or lifestyle choices. It is meant to be more of a guide for when you're looking to live in a particular city or neighbourhood. You can run this calculation and see if it makes sense to buy or rent there.

For income properties, you're more likely to have stronger cash flow with a lower price-to-rent ratio.

Re: Price-to-Rent Ratio – What is it and how can it be used?

Ryan Price — Thu, 19 Jan 2012 14:16:36 -0000

Hey Emerson,

Yeah Vancouver is one area I won't be buying real estate anytime soon. That market is due for a (possibly large) correction!

For down payment there is really no magical guideline. It really depends on your situation. Right now the minimums for Canada are 5% for your own home and 20% for an investment property.

If you're putting down enough to have 20% of your mortgage paid off now or in the near future, I'd recommend getting a readvancable mortgage which simply means you can borrow equity from your house to invest elsewhere (even in other real estate!). It's called The Smith Manoeuvre and you can read about it here: http://www.milliondollarjourne...

The more you're able to put down the better as you'll pay less interest over time, and if you use the Smith Manoeuvre that money can still be accessed for other investments. That said, some people would rather pay more interest over time and use the extra money they've saved to travel. Whatever lifestyle works for you.

If you're debating "do I buy now, or save up more and buy later?" my answer would also be "it depends":

1. If its for a long-term investment property I would recommend buying as soon as you can afford quality properties that will cash flow.

2. If you're buying for yourself it would depend on the market. In a place like Toronto, especially the Condo market, I would use the price-to-rent ratios and ask myself if my money is best spent on purchasing property right now.

There are two ways for properties to come back down to a price-to-rent ratio that is more inline with historical values. The first is that rents could move up and the second is that prices could come down.

Historically, it has been far more likely that prices come down.

Re: Price-to-Rent Ratio – What is it and how can it be used?

Dmitrii Filatov — Thu, 19 Jan 2012 14:02:41 -0000

what about comparing two different properties? how do you calculate whether it makes more sense to rent in one area vs. buying in another?

Re: Price-to-Rent Ratio – What is it and how can it be used?

Emerson Cho — Thu, 19 Jan 2012 13:46:06 -0000

Another great blog ! People have been telling me it's a lot more expensive to buy in Vancouver but almost the same to rent - it's nice to see there are numbers to back that up.

Speaking of buying property, do you have any tips on what the optimal down payment is for some particular interest rate ?

Re: How we bought our first income property – Part II (Market Research)

Ryan Price — Mon, 16 Jan 2012 11:58:25 -0000

Just posted: http://www.ryanprice.ca/2012/0...

Re: How we bought our first income property – Part II (Market Research)

Ano — Sat, 14 Jan 2012 23:15:56 -0000

Where is Part III?

Re: How we bought our first income property – Part II (Market Research)

Ano — Tue, 10 Jan 2012 12:00:02 -0000

Part III?

Re: How we bought our first income property – Part I (The Preparation)

Ryan Price — Tue, 09 Aug 2011 22:45:27 -0000

Soon Frank, soon.

Re: How we bought our first income property – Part I (The Preparation)

Yoonho Frank Jung — Tue, 09 Aug 2011 20:26:11 -0000

i want rest of the stories! now!

Re: How to Calculate Cap Rate on Real Estate Investments

Ryan Price — Thu, 09 Jun 2011 13:26:33 -0000

You would include mortgage repayment when calculating cash flow, and overall rate of return (ROI). Its not included in cap rate because cap rate is designed to be a measure of how profitable an investment is regardless of how its financed.

The ROI and cashflow will change from person to person depending on how they are financing the property and how much they have available as a down payment. Cap rate will be the same for everyone and therefore provides a level field to compare properties.

Once you determine which cap rate you like the best, you can start to figure out the most profitable way to finance it.

Re: How to Calculate Cap Rate on Real Estate Investments

Emerson Cho — Wed, 01 Jun 2011 16:14:41 -0000

so why doesn't the formula include mortgage repayment ?

Re: How to Calculate Cap Rate on Real Estate Investments

Yoonho Frank Jung — Wed, 01 Jun 2011 15:33:10 -0000

awesome article!