DCR or debt coverage ratio, is one if not the most important thing to factor when it comes to commercial financing. However, it is one of the most overlooked aspects so I thought I would touch upon it’s importance here.
Last month, I closed on a very difficult commercial deal – a 12-plex in Orlando, FL. When looking at it initially the numbers looked strong and keep in mind at first glance they always will as they are put together by the realtor to get it sold. It is not until I as the broker or the lender do further due diligence with proper numbers, backed up by P/L and rent rolls, that the true numbers come out in the wash.
Many investors have been looking at their current residential portfolio’s and not liking what they are seeing. For instance, the recent rule changes have affected their ability to grow their single-family portfolio’s with CMHC no longer insuring these properties, which means less lenders to choose from. Furthermore, after the recent rate hikes and more to come, cash flows have also been affected.
As a mortgage broker, I always strive to think out of the box, in order to stay competitive.
With that in mind, over two years ago, I went to the US (specifically Florida) and started making contacts with realtors, other mortgage brokers, lenders and wholesalers, just to name a few.
Once I had my contacts established and verified, meaning I would only work with referral sources that had been verified and could back up their offerings with proper protocols in place, I was then able to hit the Canadian market and start marketing this source of business. It has not been easy and has taken a lot of work but in the end, it has definitely worth it, as I have been assisting countless investors in Canada to invest in both residential and multi-family properties.
We have all been keeping an eye on what has been happening with our neighbours to the south and wondering how the so called Trump effect will affect us in Canada.
Many of my Canadian clients who have been investing in many US markets continue to pursue investing in the US as they don’t feel that the Trump effect is something to worried about.
Furthermore, with low property prices, low vacancy rates, high cash flow and most importantly no bidding wars, there are many opportunities to get into the market without breaking the bank – even with the exchange rates as they are!
Many of my clients, myself included still plan to invest in the US but are wondering what options exist for financing, so I thought this would be a great primer on how to finance your properties as a Canadian investing in the US.
Recently I was approached to finance a commercial building in Hamilton, Ontario.
The property was a vacant and former rooming house and the clients wanted to transform it into a retirement home. The clients were a retired nurse and two personal support workers, all of whom had experience working with seniors, however they did not have experience operating a retirement home.