Multiple Rentals? It’s Not A Bad Retirement Plan!

Multiple Rentals: Do You Want To Build An Empire?

We don’t know how many multiple rentals we’re talking about yet. How much rent they could generate? Which banks would be on board for an “inexperienced” landlord? We also don’t know the house prices or property taxes.

Generally speaking, you can afford a mortgage of about 4x your gross income. This is a very rough figure. Just to simplify, I’m going to guess at the rent that the homes will generate and I’m going to guess at how much of the rent the banks will used to qualify. I’m also assuming that you are making $100K that we can use.

Income:

• #1 Home: owner-occupied and rented – $750/mth of usable income (I’m taking 50% to be safe)
• #2 Home: rental – generating $2500/mth – $1250/mth of usable income
• #3 Home : rental – generating $2500/mth – $1250/mth of usable income

Total usable rental income annually: $39K

Salary: $100K

Total income: $139K/yr

This can very very roughly support let’s say $600K worth of mortgages.

Let’s say you have $500K of cash from the sale of all proceeds and after all debt is paid.

If we spread this evenly over 3 homes, you are purchasing 3 homes, each with a purchase price of $360K, carrying a $200K mortgage and putting $160K down on each one.

The mortgage payments (principle & interest) will be (again VERY roughly) $3000/mth ($36K/yr).

Say property are total for all 3 homes $8K/yr.

Utilities not sure if the tenants will pay so I’ll leave those out. Also insurance etc. so I’m not factoring some things in.

Total mortgage payments and property taxes $44K/yr. That comes out of your rental income of $78K/yr. Net is: $78K – $44K = $34K/yr.

That means your return on the $500K investment is about 7% AND you don’t have mortgage payments (renter #1 is paying your mortgage) AND you have the homes (hopefully) appreciating in value.

That’s one scenario. Can you find 3 homes at $360K? I don’t know. Will the banks use more of the rental income to help you qualify for more? Maybe. Should you look at one owner occupied/rental and then one triplex? Maybe. The list of questions goes on BUT I would suggest we start with one user occupied so that you can stop paying rent and rather start charging it, and then go from there.

Sean Howard is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Sean, he can be reached at 905-574-9200 #216. Alternatively, you can contact Sean here.

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