Would this C$695,200 Montreal condo produce enough net yield?

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FriendlyLens

Property investor
Established
I would like this Montreal condo to produce workable net cash flow, but the numbers keep pulling me back. After 86 days of considering it, the C$695,200 price against expected rent of C$2,653 a month still gives only about 4.6% gross.

It is a 5-bed and the building looks sound, but there is little room for an overlooked expense. I have allowed for vacancies, management, regular upkeep and a larger future repair. I still need verified property tax, condo fees, insurance and owner-paid utilities, and I want to test how sensitive the result is to the financing terms.

Which local cost would you verify first? I am also wondering what minimum net return others would require before accepting the maintenance and financing risk at this price.
 
Annual rent is C$31,836, so there is not much room between the 4.6% gross figure and a weak net result. I would verify the actual property-tax bill, condo fees, insurance and every utility the owner must pay. Don’t estimate those from comparable listings. At this yield, even several individually modest costs can sink the deal.
 
Is C$2,653 based on an existing lease, a firm rental assessment, or an asking rent? Also, would the 5-bed be rented under one lease or by room? That distinction could change vacancy, management effort, insurance questions and turnover costs substantially. The rent assumption may matter more than refining the repair reserve.
 
I disagree slightly that operating costs are necessarily the biggest issue. If this is financed, sensitivity to the mortgage terms could dominate everything else. Run the cash flow at the rate and down payment you actually expect, then again with a higher renewal cost and no rent increase. A tolerable unlevered yield can still produce uncomfortable monthly cash flow.
 
With a condo, I’d separate repairs inside the unit from building-level exposure. Your personal maintenance reserve does not remove the possibility of a special assessment, while a healthy condo reserve may reduce some building risk. The meeting records, reserve information and history of major work are therefore worth examining rather than relying only on how sound the building looks.
 
There isn’t one net-yield number that works without knowing the financing and the alternatives for the capital. Personally, below 3% unlevered net would not compensate me for tenant turnover and condo uncertainty; around 4% would at least merit deeper work. But calculate net yield before mortgage costs, then show cash flow after financing separately. Combining them makes it difficult to see whether the property or the loan is causing the weakness.
 
Before changing your mind again, make a one-page downside case: verified tax, condo fees, insurance quote, owner-paid utilities, management, vacancy, turnover work and both routine and exceptional reserves. Then reduce the expected rent and add a financing stress case. If the deal only survives when C$2,653 arrives every month and no building expense appears, the 4.6% headline is doing too much of the selling.
 
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