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URL:  https://boards.fool.com/two-things-first-the-reason-i-came-up-with-a-pi-15442847.aspx

Subject:  Re: Possible first buy Date:  7/25/2001  4:22 PM
Author:  jiml8 Number:  592 of 14356

Two things. First, the reason I came up with a PI that was lower than yours is that I am a Canuck and in Canada mortgages are compounded semiannually which would account for the difference. Sorry that I forgot to mention that.

Oh. Well that certainly does make a difference. What about your income taxes? How do you do depreciation? My calculations were all based on the US system.

I probably should have gone into a little more detail on my question, but I think I mentioned that the lease would be triple net(not sure if that is Canadian terminology). This means that the taxes, maintence costs and insurance is all the responsibility of the renter.

I did catch that, but not having any such properties I read it as tenant is responsible for all maintenance/upgrades. My bad; I should have caught that.

This changes the situation somewhat and puts me back at a gross effective yeild of a little over 17%. If this were the situation, is it still something that you would pass up?

It still looks skinny to me. Off the top, without doing a detailed calculation, in a circumstance where I don't have to pay taxes, insurance, or maintenance I would be happy enough with a 30% return. Allowing for a long term lease (and presuming the Lessee is solid and stable) I might shave another 5 points off that, which would put me at 25% ROI.

Don't forget that downside. If things go sour, will you be able to pay the $9 - something - hundred per month, plus the taxes? You should maintain an exit strategy if you need one.

Oh, and Rick is right. My risk tolerance is probably somewhat different than yours. I have taken lots of risks over the years; some have paid off handsomely and others have been expensive. At this point, I am more interested in making things cash flow handsomely than in expanding rapidly. So I am a bit risk averse right now.




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