How to Cashflow Over $1,000 in 2019

This is a two-part article. Check out Part 2: “How to get $75,000 tax free in just two months”.

Here is a detached home in the north end of Barrie that we closed on in May 2019. By converting it to a legal duplex, you effectively increase your rental income by 50%.

Purchase Price: $458,000
Downpayment + Closing Costs: $99,675.19
Renovations: $40,906
80% LTV @ 2.74% 4 year fixed, 30 year amortization

Monthly Rental Income
Upper: $1,675 + 60% utilities
Lower: $1,425 + 40% utilities
TOTAL: $3,100

Monthly Expenses
Mortgage: $1,493.86
Vacancy (5%): $152.50
Property Tax: $275.66
Insurance: $111.78
Maintenance Cost: $200
TOTAL: $2,233.80

Cash Flow: $866.20
We had no vacancy since we filled the unit even before we closed on the property. Going forward, vacancies are unlikely since the tenant has to give 60 days notice before vacating the property and we can fill a unit in just a few weeks. Since we didn’t have any vacancies, we can add the $152.50 to our cash flow.

Now, this cash cow doesn’t factor in:
Appreciation (conservatively, we’ll say 3% = $13,740)
Principal paydown ($7,987 in the first year and increases every year)
Forced appreciation by converting its use (duplexes in Barrie are going for a premium of $70,000 to $100,000 because of the income they generate). A comparable duplex on the same street was recently listed for $560,000 compared to what I bought it for $458,000. Based on the comps and market analysis, the after repair value (ARV) of my house is easily worth north of $550,000.

Purchase Price: $458,000
Initial Investment: $99,675.19
(Renovation costs can be financed via a program called Purchase Plus Improvements)

Current Appraised Market Value: $550,000
Yearly Principal Paydown $7,987 +
Yearly Cashflow: $12,224.40
Yearly Appreciation: $13,740 +

ROI: 34.06% return!

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