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.