Comments on: Income Property Financing for New Investors http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm Building Wealth through Saving and Investing Mon, 15 Mar 2010 19:21:28 -0400 http://wordpress.org/?v=abc hourly 1 By: Future Money-Bags http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-109830 Future Money-Bags Fri, 22 Jan 2010 10:54:32 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-109830 I know old post but I just found it! Great info, very clear. I didn't have any Idea of what is a good credit for a rental property mortgage, good to know that I qualify at such a young age. The hardest part is getting the ball rolling and getting that first property.. I know old post but I just found it!

Great info, very clear. I didn’t have any Idea of what is a good credit for a rental property mortgage, good to know that I qualify at such a young age. The hardest part is getting the ball rolling and getting that first property..

]]> By: FrugalTrader http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-55019 FrugalTrader Fri, 03 Oct 2008 14:47:58 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-55019 Kyle, there are a couple ways you can set this up. You can setup a general partnership where all income/expenses are personally split between you. Or, you can setup a more formal corporation where you both become shareholders. I would suggest that you speak with an accountant to get the nitty gritty details of each option. Kyle, there are a couple ways you can set this up. You can setup a general partnership where all income/expenses are personally split between you. Or, you can setup a more formal corporation where you both become shareholders. I would suggest that you speak with an accountant to get the nitty gritty details of each option.

]]> By: Kyle http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-54939 Kyle Fri, 03 Oct 2008 08:09:09 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-54939 I am looking at purchasing a rental property with a friend, were both young and want to enter the renting market. How would we go about this. We both have a very good income but both own homes and school debts. Would we start a small business or can we both share the income and income tax breaks etc? Any idea's would help! Thanks I am looking at purchasing a rental property with a friend, were both young and want to enter the renting market. How would we go about this. We both have a very good income but both own homes and school debts. Would we start a small business or can we both share the income and income tax breaks etc? Any idea’s would help!
Thanks

]]> By: Canadian Mortgage http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-31581 Canadian Mortgage Thu, 17 Apr 2008 17:22:02 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-31581 A brief update... CMHC now also considers market rents in lieu of leases. That's a plus for folks buying vacant rental properties. You'll need an appraisal or qualified "opinion letter" to establish fair market rents. Just make sure there's no underlying reason the property is vacant. :) Cheers, Rob A brief update…
CMHC now also considers market rents in lieu of leases. That’s a plus for folks buying vacant rental properties. You’ll need an appraisal or qualified “opinion letter” to establish fair market rents.

Just make sure there’s no underlying reason the property is vacant. :)

Cheers,
Rob

]]> By: Canadian Mortgage http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30555 Canadian Mortgage Wed, 09 Apr 2008 04:16:17 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30555 Hi Stephen, Thanks so much for the very kind feedback. I've heard the same thing about St. John's from others as well. (i.e. it's getting a bit rich.) Yet some folks we talk to still seem to be finding occassional value there--especially vis a vis Vancouver, Calgary, etc. As a side note, the rule of thumb we use is that people should budget for roughly 10%-15% vacancy (or the local vacancy rate if higher) and have about six months of cash reserves to weather any storms. Cheers, Rob Hi Stephen,

Thanks so much for the very kind feedback. I’ve heard the same thing about St. John’s from others as well. (i.e. it’s getting a bit rich.) Yet some folks we talk to still seem to be finding occassional value there–especially vis a vis Vancouver, Calgary, etc.

As a side note, the rule of thumb we use is that people should budget for roughly 10%-15% vacancy (or the local vacancy rate if higher) and have about six months of cash reserves to weather any storms.

Cheers,
Rob

]]> By: Stephen Winters http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30544 Stephen Winters Wed, 09 Apr 2008 02:22:25 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30544 Thankfully real estate prices in St. John's are no where near the prices in the bigger cities, however we are seeing some first time investors shy away here now. Typical prices for 2-apt investment properties have jumped considerably reducing positive cash flow. At a price of $210,000 your monthly mortgage and property taxes would be about $1325 (zero down). Rent for the property would be about $1450. Is it worth the risk for zero down and only $125 per month? One or two vacant months would really hurt if they didn't have cash in reserve for this. Great article by the way...made me call my mortgage broker and discuss some options. Thankfully real estate prices in St. John’s are no where near the prices in the bigger cities, however we are seeing some first time investors shy away here now. Typical prices for 2-apt investment properties have jumped considerably reducing positive cash flow.
At a price of $210,000 your monthly mortgage and property taxes would be about $1325 (zero down). Rent for the property would be about $1450. Is it worth the risk for zero down and only $125 per month? One or two vacant months would really hurt if they didn’t have cash in reserve for this.
Great article by the way…made me call my mortgage broker and discuss some options.

]]> By: Mortgage Broker http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30462 Mortgage Broker Tue, 08 Apr 2008 03:18:52 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30462 Hi Daniel, Normally I like to answer questions online if at all possible, but the answer to your question has a few too many facets. If you'd like to get in touch with me directly we can talk it over and discuss some options. Hi Acorn, Generally residential income properties with 5+ units are considered commercial. If this is what you're referring to then this guide is a good place to start your research: http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comments If you're talking retail or office space then lending decisions are based largely on the income the property generates, debt coverage ratios, market lease rates, loan-to-value, the marketability of the property, the purchaser's net worth, etc. You'll often need to provide the following: three years of financial statements, tax returns, net worth statements, pro formas, personal guarantees, etc. Hi Sarlock, That's sad but true. With respect to major markets like Vancouver, Calgary, and Toronto, opportunities to cash flow are few and far between. Investors we chat with seem to be having the most success in 2nd and 3rd tier markets that have economic and/or demographic catalysts and non-stratospheric prices. St. John's, NF and Vernon, BC are two such examples. Hi Brent and Paul, Thank you!! Cheers, -Melanie :-) Hi Daniel,

Normally I like to answer questions online if at all possible, but the answer to your question has a few too many facets. If you’d like to get in touch with me directly we can talk it over and discuss some options.

Hi Acorn,

Generally residential income properties with 5+ units are considered commercial. If this is what you’re referring to then this guide is a good place to start your research:

http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comments

If you’re talking retail or office space then lending decisions are based largely on the income the property generates, debt coverage ratios, market lease rates, loan-to-value, the marketability of the property, the purchaser’s net worth, etc.

You’ll often need to provide the following: three years of financial statements, tax returns, net worth statements, pro formas, personal guarantees, etc.

Hi Sarlock,

That’s sad but true. With respect to major markets like Vancouver, Calgary, and Toronto, opportunities to cash flow are few and far between.

Investors we chat with seem to be having the most success in 2nd and 3rd tier markets that have economic and/or demographic catalysts and non-stratospheric prices. St. John’s, NF and Vernon, BC are two such examples.

Hi Brent and Paul,

Thank you!!

Cheers,
-Melanie :-)

]]> By: paul s http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30448 paul s Mon, 07 Apr 2008 23:47:16 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30448 FT: Great article. Just confirmes again for me that your blog is becoming one of the best Canadian financial sites on the web. Well done! FT:
Great article. Just confirmes again for me that your blog is becoming one of the best Canadian financial sites on the web. Well done!

]]> By: Brent http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30443 Brent Mon, 07 Apr 2008 21:02:59 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30443 One of the best articles I've seen for Canadians looking to purchase revenue properties with a low or no down payment. One of the best articles I’ve seen for Canadians looking to purchase revenue properties with a low or no down payment.

]]> By: Sarlock http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30442 Sarlock Mon, 07 Apr 2008 19:38:46 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30442 With the run-up in house prices in most major Canadian cities, rental rates do not come even close to being cash flow positive. Buying a $375,000 home in Edmonton or Calgary will get you about $1,500-$1,800 per month in rent. When net against expenses such as property taxes, maintenance, etc, you will be lucky to cover half of the mortgage payment with the rent. This requires you to have a significant amount of income to cover the shortfall. I would advise caution to anyone looking to get an investment property at this time, given what has happened across the border and how over-inflated house prices are in many Canadian cities (especially Vancouver). If house prices drop by $100,000, it'll take you many, many years to recover. With the run-up in house prices in most major Canadian cities, rental rates do not come even close to being cash flow positive. Buying a $375,000 home in Edmonton or Calgary will get you about $1,500-$1,800 per month in rent. When net against expenses such as property taxes, maintenance, etc, you will be lucky to cover half of the mortgage payment with the rent. This requires you to have a significant amount of income to cover the shortfall.

I would advise caution to anyone looking to get an investment property at this time, given what has happened across the border and how over-inflated house prices are in many Canadian cities (especially Vancouver). If house prices drop by $100,000, it’ll take you many, many years to recover.

]]> By: Mortgage Broker http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30441 Mortgage Broker Mon, 07 Apr 2008 17:51:24 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30441 Hi Everyone! Thanks for the great questions! I'll answer them all tonight in one big batch if that's okay!? Cheers, Melanie Hi Everyone!
Thanks for the great questions! I’ll answer them all tonight in one big batch if that’s okay!?
Cheers,
Melanie

]]> By: Acorn http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30440 Acorn Mon, 07 Apr 2008 17:40:27 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30440 HI, Are there any specific requirements / financial details for commercial income properties? HI,
Are there any specific requirements / financial details for commercial income properties?

]]> By: FocusLiberty http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30435 FocusLiberty Mon, 07 Apr 2008 17:11:10 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30435 To throw another idea and maybe not for the new investor but another strategy one could use would be to use the LOC and put the Smith Manouever strategy to use. You need the right mortgage to do this. Make sure the property cash flows! Perfect for those looking to paydown their personal residence mortgage, increase net worth and reduce taxes. Have a qualified financial advisor or mortgage broker and accountant explain how to set this up. To throw another idea and maybe not for the new investor but another strategy one could use would be to use the LOC and put the Smith Manouever strategy to use. You need the right mortgage to do this. Make sure the property cash flows! Perfect for those looking to paydown their personal residence mortgage, increase net worth and reduce taxes. Have a qualified financial advisor or mortgage broker and accountant explain how to set this up.

]]> By: FrugalTrader http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30434 FrugalTrader Mon, 07 Apr 2008 16:35:16 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30434 Daniel, you'll have to consult an accountant. But I believe if you use equity from your rental to put into a principle residence, that portion of the loan will not be tax ded. Daniel, you’ll have to consult an accountant. But I believe if you use equity from your rental to put into a principle residence, that portion of the loan will not be tax ded.

]]> By: Daniel http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30408 Daniel Mon, 07 Apr 2008 13:44:54 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30408 What would be the best way for us to buy a second property and keep the current as a rental? 1. Buy the new house (principal residence) with little money down. 2. Refinance the current house (to become rental) to %100 and use the equity as a down payment for the principal residence. Daniel What would be the best way for us to buy a second property and keep the current as a rental?

1. Buy the new house (principal residence) with little money down.

2. Refinance the current house (to become rental) to %100 and use the equity as a down payment for the principal residence.

Daniel

]]> By: Mortgage Broker http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30405 Mortgage Broker Mon, 07 Apr 2008 12:55:42 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30405 In most cases no! Fixed and variable rates are virtually the same for rentals and primary homes, for qualified applicants. Although some lenders consider them "Alt-A" (alternative "A") products and might charge a 0.10% premium for example. -Melanie In most cases no! Fixed and variable rates are virtually the same for rentals and primary homes, for qualified applicants. Although some lenders consider them “Alt-A” (alternative “A”) products and might charge a 0.10% premium for example.
-Melanie

]]> By: FrugalTrader http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30404 FrugalTrader Mon, 07 Apr 2008 12:40:28 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30404 Mel, another question, are the mortgage rates for investment properties different than those for a principle residence? Mel, another question, are the mortgage rates for investment properties different than those for a principle residence?

]]> By: Mortgage Broker http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30403 Mortgage Broker Mon, 07 Apr 2008 12:36:27 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30403 Hi FT, Generally yes. Although if someone needs help qualifying, despite a 20% down payment, this can sometimes only be done by using an insured product. Cheers, -Melanie Hi FT,
Generally yes. Although if someone needs help qualifying, despite a 20% down payment, this can sometimes only be done by using an insured product.
Cheers,
-Melanie

]]> By: FrugalTrader http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm/comment-page-1#comment-30399 FrugalTrader Mon, 07 Apr 2008 11:25:05 +0000 http://www.milliondollarjourney.com/income-property-financing-for-new-investors.htm#comment-30399 Melanie, I have a quick question, what if the investor has <b>20% down</b>, does this avoid all mortgage insurance fees like it does on a principle residence? Melanie, I have a quick question, what if the investor has 20% down, does this avoid all mortgage insurance fees like it does on a principle residence?

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