Rental deal in Calgary: C$1,080,000 purchase, C$5,142/month — sanity check?

[RightRoom]

A 5.7% gross yield looks reasonable at first glance, but the insurance figure could change the deal. I’m looking at a 3-bed new-build flat in Calgary for C$1,080,000, with expected rent of C$5,142 a month rather than an existing lease.

My figures include management, vacancy, normal upkeep and a separate repair allowance. I still need to test the financing at less favourable rates and confirm which costs overlap with the condo fee. Which local expense would you verify first, and what level of net cash flow would justify the remaining risk?

 

[hana.slate]

Before choosing a target yield, I’d want the actual property-tax, insurance and condo-fee figures. Also check what the condo fee covers so you don’t reserve twice for the same item—or assume the corporation covers something it does not.

Is C$5,142 supported by an existing lease, or is it only expected market rent? At this price, a modest miss on rent or expenses could take a noticeable bite out of the 5.7% gross figure.

 

[RightRoom]

It’s expected rent rather than an in-place lease, so I’m not treating it as guaranteed. Good point on overlap with the condo fee. I’ll get the fee schedule, property-tax figure and an insurance quote before refining the net yield.

Would you stress-test one vacant month each year, or model turnover separately as a less frequent but larger cost?

 

[SannaCedar]

I wouldn’t assume insurance is the main danger. Rent and turnover may matter more because one vacant month removes C$5,142 before cleaning, repairs or leasing costs. A full month every year might be too blunt, but it is a useful downside case alongside a lower-vacancy base case.

I’d also run the financing at several rates rather than judge the deal from net yield alone. A property can look acceptable unlevered yet have weak cash flow once debt service is included.

 

[LuckyBeam]

Build three versions: expected rent and normal turnover; lower rent plus one vacant month; and the same downside case with higher insurance, condo fees and financing costs. Use written quotes or current statements wherever possible.

I wouldn’t set a universal minimum net yield. Compare the stressed cash flow with what you could earn elsewhere, then ask whether the remaining return compensates for tenant turnover, illiquidity and the possibility of larger building costs.