I’m getting settled into my new home, a newly renovated duplex in a great neighbourhood near recreation and transit. It’s got all the features I’ve been looking for – 3 bedrooms, 1 1/2 bathrooms, stainless steel appliances, fireplace, garage, you name it.
But the best thing about it is the price. I got it for a one-time payment of $370,909 – including all future taxes and maintenance.
Now wait a minute you say, nobody can get a deal like that. Well here’s how. I figure I get an after tax cash yield of about 5.5% on my investments. If I set aside $370,909 worth of my investments, I get $1700/month, which is what I pay for rent. My name is on my brokerage statement rather than on the deed, but I get the same shelter.
So what if I bought a similar property? I’d have to pay taxes, maintenance and insurance. Say these total $5K/year. Again using the 5.5% yield I’d have to set aside $90,909 more of my investments to pay these. So I figure the property would be a decent buy at $280,000.
Which gives a price/rent of 165. I’m quite willing to wait for that to buy – in the meantime I’m doing just fine.
(hat tip to M-)