Are your children heading to the University? If so, you should consider a housing option that could create a free living arrangement for your son/daughter while they’re away at school and could potentially refund the full cost of their education upon graduation!
Example: Let’s take a detached 5-bedroom home purchased for $299,900 with 20% down payment and at a conservative interest rate of 3.5% for five years and amortized over 25 years. *Although the Guelph Real Estate market has being appreciating around 5%-8% per year over the past many years, I always encourage investors to use a very conservative 2% appreciation rate when calculating their return. This is what 5-year calculation of Total Income would look like:
Purchase price $299,900.00 with a 2% annual appreciation rate:
- Year 1 = $5,998.00
- Year 2 = $6,117.96
- Year 3 = $6,240.32
- Year 4 = $6,365.13
- Year 5 = $6,492.43
- $31,213.84 Total Appreciation Value over 5 years
Now here’s the fun part! For the purpose of this article, I’ve calculated the Positive Cashflow and Mortgage Balance Paid over the course of 5 years on external spreadsheets, taking in account property taxes, rents, insurance, etc. to aid in our Total Income calculation below.
- Positive Cashflow = $27,919.00
- Total Appreciation Value = $31,213.84
- Mortgage Balance Paid = $32,820.09
- TOTAL INCOME = $91,952.93
Here are some more great points to consider:
- All or most of your mortgage and utility expenses on your investment property would be covered by the rent payments collected from your son/daughter’s roommates.
- By living in the investment property, your son/daughter would learn the responsibility of maintaining a property, collecting rent payments, etc. and would also get to enjoy the house while it appreciates!
- Investing in a property with a net positive cash flow would provide you with extra money in your pocket each month. This positive cash flow combined with a profitable resale upon graduation, could potentially refund the entire cost of your child’s education!
A fundamental analysis of real estate and economic trends can allow the investors and homeowners to use market intelligence to purchase properties that have above-average potential for investment returns. For market updates and/or access to excellent investment calculation tools, please contact me at firstname.lastname@example.org .