Model a property before you buy it

A prospect is a property you are deciding whether to buy. You record what the seller is asking and what you think it will earn, and Wealthru works out the same numbers it shows for the properties you already own.

Tooling, not investment advice. The assumptions are yours and so is the decision.

What this does, and what it does not do

It does: hold your assumptions about one property, and turn them into a cap rate, cash on cash, monthly cash flow and a coverage ratio, using the same calculation as the rest of your portfolio. A prospect and a property you own with identical numbers will always agree.

It does not: touch your books. A prospect posts nothing to your ledger, and it stays out of

• your net worth and equity,
• your tax pack and T776,
• your owner statements,
• your plan limits. A prospect does not use up a property slot.

That last one is deliberate. You should not be pushed onto a bigger plan for a building you have not bought.

Add a prospect

1. Go to Prospects in the Portfolio menu.
2. Choose Add a prospect.
3. Give it a name and where it is.
4. Under Your assumptions, enter the asking price, the rent you expect each month, and the operating costs each month. Costs means taxes, insurance and fees. It does not mean the mortgage, because Wealthru works the mortgage out from the financing below.
5. Under Financing, enter the down payment, rate and amortization if you plan to borrow. Leave all three blank if you are paying cash.
6. Choose Save prospect.

Reading the numbers

Cap rate is the annual net operating income divided by the asking price. It ignores financing, so it is the number to compare two buildings with.

Cash on cash is the annual cash flow against the cash you put in, so it does depend on your financing.

Cash flow is what is left each month after operating costs and the mortgage payment.

Coverage is how many times the net operating income covers the mortgage payment. If you left the financing blank, this reads Not financed rather than a number. There is no loan to cover, so there is no ratio, and Wealthru will not invent one.

Why a figure might be blank

Wealthru shows a dash instead of a number when it does not have what it needs. A blank is not zero. If cash on cash is blank, you have not entered a down payment, so there is no cash invested to measure a return against.

When you buy it

1. On the prospect, choose I bought it.
2. Enter the purchase price. This is what you actually paid, not what was asked. Wealthru leaves it blank on purpose, because the two are rarely the same number and the price you paid is what every future capital gain is measured from.
3. Enter the closing date.
4. Enter your closing costs if you have them. Land transfer tax, legal fees, title insurance and the inspection. These raise your cost base, so they lower a future capital gain. They are not part of your cap rate, because a cap rate is measured against the price.
5. Enter the down payment, rate and amortization you actually took, if you borrowed.
6. Choose Record the purchase.

You land on the property, and from that moment it behaves like every other property you own. It counts toward your plan limits, it appears in your properties list, and it joins your tax pack.

Your assumptions are kept. The pro-forma you underwrote with stays on the property, so you can compare what you expected against what actually happens.

It is not in your net worth until you value it. A price you paid is not what the property is worth today, and Wealthru will not treat one as the other. Add a valuation on the property when you want it in your equity.

If you are at your plan's property limit, Wealthru tells you which plan to move to and the prospect stays a prospect. Nothing half happens.

Compare it against what you already own

Choose the prospect's name to open it. Your assumptions sit beside what the properties you already own actually earn, using the same calculation for both, so the two are genuinely comparable.

It tells you what the comparison is based on. Only properties with a purchase price on file can be part of it, so you will see something like "Based on 3 of your 8 properties, the ones with a purchase price on file". A number without knowing what it was measured over is not much use.

If you do not own anything yet, it says so. You will not see a made-up 0%. There is simply nothing to compare against until you own a property, and Wealthru would rather say that than invent a figure.

If you own properties but have not recorded what you paid, it says that instead, because the fix is different. Add a purchase price on the property's Financials tab and the comparison fills in.

A negative number is shown, not hidden. If your portfolio's costs exceed its income, the comparison says so. That is the whole point of measuring against reality.

Average rents in the area

Where Wealthru has CMHC figures for the area, they appear underneath. These are per unit size (a 1 bedroom, a 2 bedroom), while your rent assumption is for the whole property, so they are there as context and Wealthru does not subtract one from the other. Comparing them directly would be comparing two different things.

When the deal falls through

Choose Archive on the prospect. It leaves your prospects list and keeps everything you entered, including your assumptions. Restore it anytime from Account details, under Archived items.

Archiving is not deleting. Nothing is thrown away.