Note: I am not an expert, this is just my thought process in how I would evaluate the purchase if I were in your shoes.
Purchase Price/Assumed Value: $233,900
Down Payment/equity: $46,780
Mortgage Principle: $187,120
year 1 Costs
Mortgage: $13,060 (5% interest)
Strata Fees: $1,854 (~$0.30/sqft)
Taxes: ~$1000
Misc: ~$300+++ (unit maintenance fund)
Total: $16,214
Year 1 Gains
Rent: $12,000
Equity Gained: $3887
Total: $15,887
Year 1 Net: -$327
Assuming no gaps in rental occupancy, you will be hovering around breaking even depending on interest rates. Realistically, there will probably be some gaps in rental which would for sure put you in the red. You should also consider income tax on rental income, albeit you say to assume it is ~0 through a "flexible" T4.
However, by investing in the Greater Vancouver Real Estate market you are banking everything on the Property Value Annual Growth Rate (PVAGR). The big difference maker will be in the equity you gain. Every year the amount of equity you gain will increase as your mortgage principle goes down. Increasing property value will further increase this.
I used this calculator to play with some numbers:
http://www.ultimatecalculators.com/h...alculator.html
Equity Gain, year 1
-2% PVAGR: Home Value: $229,222
Equity Gain:
-$791
-1% PVAGR: Home Value: $231,561
Equity Gain: $1,548
0% PVAGR: Home Value: $233,900
Equity Gain: $3,887
1% PVAGR: Home Value: $236,239
Equity Gain: $6,226
2% PVAGR: Home Value: $238,578
Equity Gain: $8,565
Also, don't forget Realtor fees when selling your property.
Questions to consider:- Is $233,900 a fair price for a 1bdrm condo in Surrey? Will it still be a fair price at completion date?
- How do you predict property values will change, in your area, over the next 2, 5, 10+ years?
- How difficult will it be to find a good, reliable, long-term tenant? or will you make it your primary residence?
Concluding Thoughts- Personally I think $454/sqft in surrey is asking a bit too much.
- I believe in the next 2 years we may see prices go down or stay the same
- However, over 5 years I believe prices will begin to rise again.
- If I were paying rent and planning to move in, I would consider the purchase (again though, I think I could find a better deal than $454/sqft)
- Otherwise, I think you are better off either investing your Down Payment money/savings at a modest return as others have suggested, or, wait 2 years, save your money for a Down Payment on a newly completed/resale unit in 2016