First-Time Investor/Home Buyer Strategies

[Zach Peterson]

I was wondering what kind of strategies are out there for a first-time home buyer looking to purchase a rental property. Owner-occupied or otherwise. Specifically in British Columbia.

In my research I have come across:

- The First-Time Home Buyers' Program and
- CMHC's consideration of rental income towards the mortgage qualification

Can these two be paired together?

What other grants, tax breaks, strategies, etc. are out there that a first-time home buyer can benefit from?

Thanks,

Zach

 

[RE123RE]

Hi,
To recommend best strategy for you, some personal info is required.
How much money do you have?
How much does a 4-plex cost where you live and what is its total generated rent?
Would you be comfortable owning a plex living in one of the units?
HBP is kind of a joke and you need to remember or are reminded to pay 1/15th back every year for 15 years.
Do empty your RRSP though in order to invest.
I emptied all my accounts in order to start a decade ago - left zero in banks, zero in rrsp, even had zero insurances - Brush like a dentist got a whole new meaning.
and Never looked back.
Thanks

 

[Matt Crowley]

Hi Zach,

I think that HBP is suited only for someone wanting to purchase their own personal home. You will not qualify for the program if you have a legal suite in the property or for any form of investment. That is just the way the program is currently set up. I think it is the best plan in Canada to buy your first home as you get to save for the down payment and closing costs of your home tax free. It is true that you need to repay the loan over 15 years. However, the loan is capped at $25,000 and you have 15 years to pay it back. So if you use the maximum amount to buy a home ($25,000), then you need to repay $1,667 per year. If you have an employer-matching RRSP program like a lot of professionals and tradesmen do, then you will need to save about $833 / year. This would be equal to a 5% of gross monthly income RRSP contribution if you only earn $16,660 per year with an employer-matching program. So, if you are making $50,000 per year, you would need to contribute 1.7% of your before tax income over 15 years to pay back the $25,000 into the RRSP. It is a great deal for the government and first time home buyer.

* but don't try and be sneaky and "intend" to move in and then don't move in or rent it after a year or two... follow the rules for the HBP or you will be hit with a nasty assessment.​

RRSP's are a fantastic way for Canadians to save and should not be overlooked. Real estate investing is fine but most guys purporting all eggs in one basket are just overleveraged and overexposed for no financial benefit.

In BC:
- buy the home, do not purchase via assignment or other cooky strategy. These will be illegal soon and for good reason. You will need to pay the land transfer tax
- I'm not familiar with grants available in BC

First time home purchase stategy with rental suite
- I am assuming you are going to need the rental income to qualify for the home you want to purchase
- CMHC's consideration of rental income will increase the amount of home you can qualify for
- Don't develop if you are short on cash, buy an already legally suited home with a tenant. This will provide you with immediate cash flow
- Buy closer to the central business district / downtown area (try to ignore the hot, sweaty breathing in some forums about LRTs and TODs, just being close to downtown in a good neighbourhood is fantastic.)
- Clean up the main floor and basement suite over time by making meaningful changes to the property: landscaping (plant trees), fix decks and fences, replace the roof, replace flooring
- Leave the basement suite utilitarian and durable
- Save up for your next home and leave the cash in the home...this will create a bit of an equity buffer in case the market takes a breath

Don't worry about how many "pins" or awards you get or if you are bronze, silver, gold, diamond or topaz. The only thing that matters if you have financial security and a plan that can get you there reliably.

Also, houses have $0 cash flow for the first 5 years as everything goes into repairs and cyclicals anyway. Real estate investing is a very long term strategy with itty-bitty cash flow.

 

[Zach Peterson]

Thanks Matt for taking the time to reply with such a complete response! I always get a lot of great information from reading your posts on threads throughout the forum!

 

[Thomas Beyer]

Buy the biggest house you can afford, in an area that suits you. That takes a good look at life style, expenses and incomes by you (and/or your spouse). Work on your employability, income, skills; then save some significant $s and work on cash availability. Become and expert in your target area and in property type (say TH or suited SF or acreage).

 

[Freerob]

There are a lot of benefits available for the first time home buyers in Canada.
The Ontario home ownership plan- You need to start a savings account with them and the amount doubles up to $1000 per year.
The home buyers plan- If you both are living in a home not owned by either of you for 5 years and you both qualify for mortgage you will get up to $50k as RRSP . and there are other things like Land transfer tax refund and the tax credit for home buyers. It would be better to consult a good mortgage broker .

Source: https://mortgages.ca/first-time-buyer-benefits/

 

[Kjeck]

Many good recommendations are given there. I would advise you look for a low-cost home, since more expensive the home, the higher your ongoing expenses will be. Start with a $150,000 home.

 

[DEWDROPS]

Many good recommendations are given there. I would advise you look for a low-cost home, since more expensive the home, the higher your ongoing expenses will be. Start with a $150,000 home.

Where do you get a 150k home?

 

[Thomas Beyer]

In a small town.

Don't buy a condo.

Start with a TH, suited house or your own personal tax free residence where you sub-lease the basement while improving your normal non-real estate income producing career.