New Mortgage Rules

Last week we were all taken aback when the Federal Government released the latest round of mortgage rules. It was not just one new rule but four new rules and it could certainly impact Real Estate Investors to name just segment.

By now we as professionals have all had time to process the changes, blog about it and even bitch about it! We need to take a step back, put things into perspective and focus our efforts on the consumers, who are our clients and potential clients.

As a mortgage broker, I focus on investors and many of the investors I work with, focus their efforts on pre-construction and rent to own to name just two methods. In light of the new mortgage rules, I wanted to discuss how they might impact real estate investors investing in these two particular areas of pre-construction and rent to own.

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Booya and the Government changes the mortgage rules again!

This past week the Trudeau Government took us all by surprise by announcing new mortgage qualification rules. The mortgage industry and the media have gone wild with speculation and concern about the future of our industry, but what does this mean for you and how do you navigate these changes going forward?

Currently in place, the Government has required homeowners with less than 20% down to qualify at the BOC rate of 4.64% for any term less than a 5-year fixed rate. Effective October 17, 2016, this requirement will apply to all insured mortgages, including fixed-rate mortgages with terms of five years or more.

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This is not my usual mortgage article but I hope you will read on anyways. I am writing about how being a mortgage broker makes me grateful everyday!

I am an avid blogger – I love writing and sharing my knowledge and experience but that last two weeks have been a mental struggle for me. I finally stopped beating myself up and sat down to think why I was struggling and realized it was because I had forsaken my daily gratitude habit, because I have been so busy with work and life in general.

I have learned through various strategies, readings, courses that having the practice of being grateful not only brings peace into my life but the ability to focus and expand that gratitude into all areas of my life, including work and family.

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Wholesaling has always intrigued me but here in Canada the deals don’t exist here as they do in the US, so the same money that you can make in the US doesn’t always exist here. Furthermore, you can buy 2-3 properties in the US vs. 1 property in Canada.

This article speaks about investing as a Canadian but the same rules apply for any foreign investor!

Not knowing much about wholesaling, I dove into researching different companies in the US and also spoke to various wholesalers, who I am very grateful to for sharing their knowledge and experiences.

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Every once in a while as investors, we come across an amazing deal and usually that deal is a deal because it needs a lot of work – otherwise known as a “handyman special”.

Then the question becomes what is the best way to financing this opportunity and which lenders will consider the “after repair” value and not the “as is” value.  Currently there are very few options that exist to renovate properties using the “after repair” value.

Options using the “as is” value literally suck!  You can do a purchase plus mortgage, where the lender will give up to 10% or $40,000 max. of the “as is” value for renovations and after all is said and done, you get to include that cost into the mortgage. However the caveat is that you must have those funds in your pocket to begin with. Another way might be to take it out of your existing HELOC or unsecured LOC, but then you are worried about timelines, paying it back, over-extending your lines of credit and worse if another opportunity comes along you have now tied up that money into the current property, waiting to flip it!

Furthermore, how far is 10% of the value going to get you? Not very far in most cases! The rest comes from your own pocket and if you are like me there are typically other uses for that money.

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I got a call today from an investor client, who is tired of losing out on bidding wars for existing homes and is considering putting an offer on a pre-construction stacked townhouse. Last year she had purchased a pre-construction condo as an investment but this year she was purchasing a stacked townhome as a second home for her son, who had just graduated school and did not have a job yet, which meant he could not qualify for a mortgage on his own. She had a pre-approval in place for 5% down on a purchase.

She was concerned that even with the 5% down she planned to put down. the builder was insisting on a 20% down payment and all of it was due in 90 days, with no firm closing date. She asked if there was a work-around. I suggested she show the pre-approval to the builder and see if she could reduce it.

She was taken by surprise by the demand for a 20% downpayment and so I thought this would be a timely article as many people are unaware of all the costs and demands that come with pre-construction. Here are some things to consider.

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As a real estate investor, I took the time to get educated in various aspects of real estate before proceeding with my first investment property purchase. However, at some point I knew that getting educated was only part of the process – at some point I would have to pull the trigger, so to speak and actually purchase the property to meet my investing goals.

Everybody has reasons for starting their real estate investing career – mine started because I thought it would be a great way to supplement my income. I never expected to evolve and learn what I have learned to date. I keep expanding my goals and hopefully this post will inspire to keep expanding yours as well. I am now involved in residential, commercial and private lending for other investors and with so many different ways to invest the overall goal is to not only grow my own passive income but to also enjoy the journey.

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Private Lending has become a hot topic of late! Due to a variety of reasons, borrowers may need private loans due to insufficient income to qualify for a mortgage, debt consolidation, damaged credit and even people looking to borrow money against their equity. However in many cases the existing lender may not be willing to lend against that equity and therefore people turn to private loans for a solution. But it’s not always that easy or clear on how they work so let’s unravel the private lending world.

In Part 1, I will speak about the borrower and private lender. In Part 2, I will speak about how you as an investor can loan your money in private lending as an alternative to owning property.

 

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I recently had an inquiry about purchasing an ocean-front property in Costa Rica? More and more Canadians are looking at investing in this beautiful country – I myself am very interested but holding off due to the dollar.

Living in Canada and especially in the eastern provinces, where it can get down to minus 40 or below, some of us tend to dream about living near the Ocean, in much warmer climates. I know I do! However, the question becomes is the reality a dream or a nightmare waiting to happen?

Being a real estate investor myself, I tend to be on the conservative side when it comes to my investment properties because the end result comes down to cash flow and protecting my investment.

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When I started out as a real estate investor, I thought that if I had the money and found “a” property, it would be easy to make money. I soon came to realize that there was so much more to be aware of – like finding the right property and knowing the right time to buy the right property. I thought that if I “timed” the market right that I would find a tenant quickly and life would be easy. Was I completely wrong? Well yes and no – let me explain!

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