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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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Deal Fell Apart

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.

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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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This story takes place in modern day times! The story is about a real estate investor who has to decide between two properties. One property is in the bustling and over-priced city of Toronto and the other property is in a smaller community to the west known as Kitchener.

The Toronto property is in Guildwood – a sought after area of Scarborough but backs on to a Go Train track. The home is beautiful and offers a main floor with the potential for a basement apartment but it would need renovations to make it happen. The price is $749,000.

The property has been sitting on the market for 31 days in a sought after area because of it’s close proximity to the train tracks. What happens in a few years when my client wants to sell this property – will he have the same issues as the current owner? Even in a seller’s market? Probably!

The Kitchener property is in a sought after area with schools and shopping nearby and also has the potential to add a basement suite but the separate entrance would have to be built-in. The asking price is $325,000.

Seems like a no-brainer right? But let’s look at the numbers to see what makes more sense!

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As a real estate investor I dreamed of having a horde of rental properties but with prices where they are, down payment requirements, land-lording issues in some cases and finding good deals, I turned instead to private lending.

I liquidated my last property after completing two Rent-to-Own deals but have kept my Four-Plex as it is a JV deal that is too good to get rid of plus it keeps me in the game so to speak.

At this point in my life, I am looking to put more focus on my retirement goals and initially I thought I could do that by having rentals, however I realized that I like the low-key approach to investing rather than looking for great deals, trying to find partners with money and chasing down tenants for rent.

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At some point in an investors’ real estate investing career or journey, you will quickly run out of funds to keep investing in properties, so what can you do?

There are many ways to move forward but in my opinion one of the best ways is to Joint-Venture with another investor.

Check out a recent podcast I gave on the Joe Fairless show about Joint Ventures http://joefairless.com/blog/jf589-how-she-syndicates-mortgages-through-jv-deals/

What is a Joint Venture – essentially it is a method where partnerships are undertaken for people to pool their funds, their talents, their knowledge and their resources to in this case, purchase a property or grow their portfolio of properties.

 

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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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Depending on whom you speak with there are many ideas of how to build a retirement nest egg. I have a specific plan for retirement that includes real estate. While many people still believe the stock market is the safer way to go, I decided long ago it was not for me.

For one, I did not want to invest and pay fees and for two I did not want to invest in the stock market, where I had relatively no control.

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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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