Question
You have $50,000 saved that you would like to invest in a rental property. The property would generate $1,000 of gross monthly rent and incur
You have $50,000 saved that you would like to invest in a rental property. The property would
generate $1,000 of gross monthly rent and incur $40
0 in monthly expenses comprising of strata fees,
property taxes, insurance & maintenance. A bank is
willing to provide a standard 25-year mortgage
at the current rate of 2.5% APR, but with the following two restrictions: Loan-to-Value (LTV) no
greater than 80% and Debt Service Ratio (DSR) no less than 125%. If the property costs $160,000,
then can you afford it? What if the bank offers 30
-year mortgage but at 3% APR - does your answer
change? In each case, calculate the maximum cost of the property that you can afford
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