Real Estate

Rental Property in GTA - Break Even Cash Flow Possible??

  • Last Updated:
  • Mar 21st, 2019 7:16 am
[OP]
Jr. Member
Jul 28, 2012
175 posts
32 upvotes

Rental Property in GTA - Break Even Cash Flow Possible??

I'm looking to buy a property in the GTA (Mississauga/Brampton more so) in the 400k to 500k range but am having a hard time finding anything that will break even in terms of monthly cash flow even with 20% down.

For the most part, within my listed price range you can only get condos or townhouses in Mississauga/Brampton and the monthly maintenance fees can get pretty crazy hence eliminating any possibility of break-even from what I can see. This unless I'm estimating rent in correctly but I've mostly been basing that on what I've seen on Realtor.ca, kijiji and other rental sites.

Has anyone been able to pull this off recently anywhere in the GTA and be willing to share some advice with a newbie??
27 replies
Sr. Member
Oct 2, 2017
641 posts
423 upvotes
well what are you numbers
I'll see you at the top, cause the bottom is too crowded
Deal Fanatic
Feb 22, 2011
6027 posts
5818 upvotes
Toronto
What do you mean even with 20% down? That is the bare minimum you can legally put down.

Every property is cash flow positive if you put enough down.
Deal Addict
Jul 21, 2008
1152 posts
1092 upvotes
GTA
mazerbeaner wrote:
Mar 12th, 2019 2:21 pm
What do you mean even with 20% down? That is the bare minimum you can legally put down.

Every property is cash flow positive if you put enough down.
Cash flowing is hard in big cities unless you purchase a multi-unit or you purchase with cash. The interest on HELOCs kill most opportunities for single family homes.
Last edited by Slono on Mar 12th, 2019 2:35 pm, edited 1 time in total.
[OP]
Jr. Member
Jul 28, 2012
175 posts
32 upvotes
azmongold wrote:
Mar 12th, 2019 2:18 pm
well what are you numbers
Take this property for example https://www.realtor.ca/real-estate/2033 ... ississauga

$375k property so after 20% down, monthly mortgage at 3% with 25 years (not even sure if I can get 3% on rental property) is $1,419 + 312 (property tax) + 700 (condo fee) + 300 (for a repairs & maintenance fund) = $2,731.

This property from what I've seen can rent for $2,200 + utilities in a best case scenario. From what I can tell this would also be a more rare find to find a 3 bedroom priced at what this unit is priced at.

I'd still be out of pocket $500 every month. Please let me know if I'm missing something.

My alternative I suppose would be to use my HELOC and buy a property in Brampton with a basement that can also be rented out but that's looking at 550K+ to purchase which I think would be a little too much past my comfort zone at this point in time.
[OP]
Jr. Member
Jul 28, 2012
175 posts
32 upvotes
Slono wrote:
Mar 12th, 2019 2:29 pm
Cash flowing is hard in big cities unless you purchase a multi-unit or you purchase with cash. The interest on HELOCs kill most opportunities for single family homes.
I'm new to this and still trying to learn. Would you say it's still worth it if you have to chip in about 300 every month to cover all expenses? Suppose that might really depend on where appreciation goes in the long run and a whole bunch of other factors....
Deal Addict
Jul 21, 2008
1152 posts
1092 upvotes
GTA
aspen300 wrote:
Mar 12th, 2019 2:32 pm
Take this property for example https://www.realtor.ca/real-estate/2033 ... ississauga

$375k property so after 20% down, monthly mortgage at 3% with 25 years (not even sure if I can get 3% on rental property) is $1,419 + 312 (property tax) + 700 (condo fee) + 300 (for a repairs & maintenance fund) = $2,731.

This property from what I've seen can rent for $2,200 + utilities in a best case scenario. From what I can tell this would also be a more rare find to find a 3 bedroom priced at what this unit is priced at.

I'd still be out of pocket $500 every month. Please let me know if I'm missing something.

My alternative I suppose would be to use my HELOC and buy a property in Brampton with a basement that can also be rented out but that's looking at 550K+ to purchase which I think would be a little too much past my comfort zone at this point in time.
With your budget, I would highly recommend looking at cities surrounding the GTA region. Some people like playing the speculation game but I wouldn’t recommend it unless you have deep pockets.
aspen300 wrote:
Mar 12th, 2019 2:36 pm
I'm new to this and still trying to learn. Would you say it's still worth it if you have to chip in about 300 every month to cover all expenses? Suppose that might really depend on where appreciation goes in the long run and a whole bunch of other factors....
If you were to buy and hold and you have the capital to support a relatively short term loss then -$300 isn’t bad. It’s all relative to your financial situation and the risk analysis that comes along with it.

Edit: if you do the math with a -$300 cash flow figure, that’s $3600 per year you’ll be paying “out of pocket”. Remember that in the long run the mortgage pay down will more than cover the negative cash flow but the equity won’t be immediately accessible. If you’re using your HELOC to finance the home you’ll need to factor the interest portion of it into your monthly expenses if you hadn’t already.
Sr. Member
Oct 2, 2017
641 posts
423 upvotes
aspen300 wrote:
Mar 12th, 2019 2:32 pm
Take this property for example https://www.realtor.ca/real-estate/2033 ... ississauga

$375k property so after 20% down, monthly mortgage at 3% with 25 years (not even sure if I can get 3% on rental property) is $1,419 + 312 (property tax) + 700 (condo fee) + 300 (for a repairs & maintenance fund) = $2,731.

This property from what I've seen can rent for $2,200 + utilities in a best case scenario. From what I can tell this would also be a more rare find to find a 3 bedroom priced at what this unit is priced at.

I'd still be out of pocket $500 every month. Please let me know if I'm missing something.

My alternative I suppose would be to use my HELOC and buy a property in Brampton with a basement that can also be rented out but that's looking at 550K+ to purchase which I think would be a little too much past my comfort zone at this point in time.
Skip the condo and buy a freehold.

420k freehold at 3% with 25years will be 1590 monthly, 1590 + 400property tax + 300 maint = 2290. You have a far better chance of breaking even with a freehold compared to a condo (dunno why people even buy these)
I'll see you at the top, cause the bottom is too crowded
[OP]
Jr. Member
Jul 28, 2012
175 posts
32 upvotes
azmongold wrote:
Mar 12th, 2019 3:04 pm
Skip the condo and buy a freehold.

420k freehold at 3% with 25years will be 1590 monthly, 1590 + 400property tax + 300 maint = 2290. You have a far better chance of breaking even with a freehold compared to a condo (dunno why people even buy these)
You're absolutely right but am I not looking at much more than 420k for a freehold in Mississauga/Brampton. Seems like 550k to 600k is more the norm at which point we're looking at a higher mortgage payment.

Or were you suggesting outside the GTA?
Deal Addict
Mar 20, 2017
1133 posts
845 upvotes
There is a reason why policy makers are heavily talking about 30 year mortgages and B20 softening now.
Especially for condo market. Especially for new constructions (which are 20-30% higher than existing units).
The reason is because investors disappeared with such bad numbers.
The conclusion #1 from that: even if you buy a condo this year, you would put yourself in danger because of mentioned above
The conclusion #2 is: wait for policymakers to offer you a candy, because it really coming very soon. Don't spoil it, don't let them think you don't need that candy.
The conclusion #3 is: rents are really too low on current levels and have no other way, but up. $3000/mo will be new normal soon or there will be nothing more built for renting out.
Just wait until numbers make sense and they will, soon.
Last edited by GalvToronto on Mar 12th, 2019 3:49 pm, edited 1 time in total.
Newbie
Oct 22, 2017
51 posts
41 upvotes
At that price range you're probably better off looking in Kitchener/Waterloo area. A lot more cash flow positive/neutral opportunities there.
Deal Addict
Dec 18, 2006
1947 posts
351 upvotes
Markham
Positive cash flow is possible, however probably not at just 20% down. In addition, there are a lot of considerations and responsibilities that many don't realize before considering investment properties.

You have to consider:
- current rate of rent for similar units
- based on rent appreciation, what your rent will be over the next 5yrs
- what interest rate you can get at the moment
- ease of rentability for the area
- liquid funds of at least 6 months carrying costs in case of vacancy (may be overkill, but better to be overly cautious)
- in case the property needs to be sold, is it in a location/area that can easily sell
- monthly "rainy day" fund for repairs etc.
- what's the maximum amount of down payment are you willing to put down to be cash-flow positive, or at least cash-flow neutral

For example, some areas in Scarborough as excellent for investment purposes and are in an area that has held values and entry price points are decent.

Good luck
Jay Rana, Sales Representative
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Jr. Member
Nov 10, 2014
187 posts
153 upvotes
Ottawa, ON
As others replied, it very difficult to find cash flow neutral properties in the GTA with 20% down. There are too many investors/speculators in Toronto still happy to buy at the current price to rent ratio for cash flow neutral properties to exist. Look into markets like London, Windsor, and KW. You should be able to find cash flow neutral properties there, but I noticed cap rates on those cities are decreasing as well now that there are many investors from GTA that are competing for the properties. If you are investing in other cities, figure out a system to manage the properties remotely.

If you insist on buying something in GTA, here are some alternatives.
1- double or triple your revenue through Air BnB, and take on the accompanying headaches
2- start a boarding house by renting out per room market towards students/ lower income workers, and take on the accompanying headaches
3- buy properties in shit condition and build sweat equity. this strategy is can be done in addition to strategy 1 or 2.
Newbie
Feb 22, 2019
13 posts
1 upvote
How about adding a part of your HELOC to your down payment, that will bring down your monthly mortgage. You will still need to pay tax on HELOC but that should be much less since you only pay the interest.
aspen300 wrote:
Mar 12th, 2019 2:32 pm
Take this property for example https://www.realtor.ca/real-estate/2033 ... ississauga

$375k property so after 20% down, monthly mortgage at 3% with 25 years (not even sure if I can get 3% on rental property) is $1,419 + 312 (property tax) + 700 (condo fee) + 300 (for a repairs & maintenance fund) = $2,731.

This property from what I've seen can rent for $2,200 + utilities in a best case scenario. From what I can tell this would also be a more rare find to find a 3 bedroom priced at what this unit is priced at.

I'd still be out of pocket $500 every month. Please let me know if I'm missing something.

My alternative I suppose would be to use my HELOC and buy a property in Brampton with a basement that can also be rented out but that's looking at 550K+ to purchase which I think would be a little too much past my comfort zone at this point in time.
[OP]
Jr. Member
Jul 28, 2012
175 posts
32 upvotes
Tadalafil wrote:
Mar 12th, 2019 4:54 pm
As others replied, it very difficult to find cash flow neutral properties in the GTA with 20% down. There are too many investors/speculators in Toronto still happy to buy at the current price to rent ratio for cash flow neutral properties to exist. Look into markets like London, Windsor, and KW. You should be able to find cash flow neutral properties there, but I noticed cap rates on those cities are decreasing as well now that there are many investors from GTA that are competing for the properties. If you are investing in other cities, figure out a system to manage the properties remotely.

If you insist on buying something in GTA, here are some alternatives.
1- double or triple your revenue through Air BnB, and take on the accompanying headaches
2- start a boarding house by renting out per room market towards students/ lower income workers, and take on the accompanying headaches
3- buy properties in shit condition and build sweat equity. this strategy is can be done in addition to strategy 1 or 2.
Thanks for the insight on the boarding house. This property is 3 rooms, do you think I can at least use some of the living room to get a 4th room. Doing so would I think allow for breakeven based on room rents in the area.

https://www.realtor.ca/real-estate/2033 ... #view=calc

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