Examples 6 Plex Calgary Turnkey Feasibility

Turnkey Example of 16 Plex town houses in Calgary

Scenario: Townhomes with Separate Basement Units

Building Description:

1. 8 Townhomes (2 Buildings) with:
   • 3-Bedroom Main Units (Upper): 8 units.
   • 1-Bedroom Basement Units: 8 units with separate entrances.

Assumptions:

1. Rents:

   • 3-Bedroom Main Units: C$2,500/month each (higher due to townhome setup).
   • 1-Bedroom Basement Units: C$1,200/month each (separate entrance increases appeal).
   • Total Monthly Rent (per townhome): C$3,700.
   • Total Gross Monthly Rent (8 townhomes): 8 × C$3,700 = C$29,600/month.
   • Annual Gross Rent: C$29,600 × 12 = C$355,200/year.

2. Purchase Price: To be determined based on feasibility.

3. Operating Costs:

   • Property taxes, management fees, repairs, and utilities as percentages of gross rent.

Step 1: Calculate Gross Rent and Expenses

Operating Expenses:

1. Property Tax: 1.2% of purchase price.
2. Insurance: Higher for townhomes—C$500/month per building = C$12,000/year.
3. Repairs & Maintenance: 5% of gross rent = C$17,760/year.
4. Property Management Fee: 8% of gross rent = C$28,416/year.
5. Utilities (common areas, shared systems): C$1,000/month = C$12,000/year.
6. Vacancy Loss: 3% of gross rent = C$10,656/year.

Total Operating Expenses (Estimate):
Property Tax (variable) + Fixed Costs = ~C$81,000/year + Tax.

Step 2: Test Feasibility for Different Purchase Prices

Financing Terms:

1. Loan-to-Value (LTV): 95% (CMHC MLI Select Program).
2. Amortization Period: 50 years.
3. Interest Rate: 4.0%.
4. Minimum DSCR: 1.1.

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Example 1: Purchase Price = C$5,000,000

1. Loan Amount (95%):
   C$5,000,000 × 95% = C$4,750,000.

2. Annual Mortgage Payment (50-Year Amortization, 4% Interest):
   ~C$216,750/year (C$18,063/month).

3. Property Tax (1.2%):
   C$5,000,000 × 1.2% = C$60,000/year.

4. Total Operating Expenses (Including Tax):
   C$81,000 + C$60,000 = C$141,000/year.

5. Net Operating Income (NOI):
   Gross Rent (C$355,200) - Expenses (C$141,000) = C$214,200/year.

6. Cash Flow (NOI - Mortgage Payment):
   C$214,200 - C$216,750 = -C$2,550/year (negative cash flow).

7. DSCR:
   NOI / Debt Service = C$214,200 / C$216,750 = 0.99 (below CMHC minimum).

Conclusion: A purchase price of C$5,000,000 is not feasible.

Example 2: Purchase Price = C$4,600,000

1. Loan Amount (95%):
   C$4,600,000 × 95% = C$4,370,000.

2. Annual Mortgage Payment (50-Year Amortization, 4% Interest):
   ~C$199,350/year (C$16,612/month).

3. Property Tax (1.2%):
   C$4,600,000 × 1.2% = C$55,200/year.

4. Total Operating Expenses (Including Tax):
   C$81,000 + C$55,200 = C$136,200/year.

5. Net Operating Income (NOI):
   Gross Rent (C$355,200) - Expenses (C$136,200) = C$219,000/year.

6. Cash Flow (NOI - Mortgage Payment):
   C$219,000 - C$199,350 = C$19,650/year (~C$1,638/month).

7. DSCR:
   NOI / Debt Service = C$219,000 / C$199,350 = 1.10.

Conclusion: A purchase price of C$4,600,000 meets the CMHC criteria (1.1 DSCR) and provides a modest positive cash flow.

Example 3: Purchase Price = C$4,400,000

1. Loan Amount (95%):
   C$4,400,000 × 95% = C$4,180,000.

2. Annual Mortgage Payment (50-Year Amortization, 4% Interest):
   ~C$190,800/year (C$15,900/month).

3. Property Tax (1.2%):
   C$4,400,000 × 1.2% = C$52,800/year.

4. Total Operating Expenses (Including Tax):
   C$81,000 + C$52,800 = C$133,800/year.

5. Net Operating Income (NOI):
   Gross Rent (C$355,200) - Expenses (C$133,800) = C$221,400/year.

6. Cash Flow (NOI - Mortgage Payment):
   C$221,400 - C$190,800 = C$30,600/year (~C$2,550/month).

7. DSCR:
   NOI / Debt Service = C$221,400 / C$190,800 = 1.16.

Conclusion: A purchase price of C$4,400,000 offers stronger cash flow and better DSCR (1.16), making it more appealing.

Summary: Feasible Purchase Price

• Maximum Feasible Price: C$4,600,000 (break-even cash flow with 1.1 DSCR).
• Preferred Price for Strong Returns: C$4,400,000 (positive cash flow of ~C$2,550/month and DSCR of 1.16).

This analysis assumes market rents in Calgary, CMHC financing terms, and typical operating costs.