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1st Time Home buyer choosing to Invest

G

Greatful

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Jan 29, 2008
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Here are the details.
I have been approved for a $200,000 Mortgage as a 1st time home buyer with nothing down.
However, I do not want to purchase a single family home to live in I would rather purchase a Duplex, rent it out and stay where I am (cheap living in a mobile home).
It is my understanding that I must actually live in the purchased home for whatever reason(guessing cause they don`t want my money going somewhere else other than the mortgage.

Heres the numbers.
Asking 289,000, I am going to assume I get it for 275,000...not unreasonable by any means over a 35 year loan with a 5 year 4.5% rate.

The rental income from this place is 2400/month.
My Mortgage will be $1320 per month.
Taxes are 280/month
Insurance 100/month
and 80/month for vacancy/repairs.

Totaling 1780 in outgoing and leaving me with a +cash flow of 620/month.

My main question is how strict are they in absolutely having to have you live there in order to get the loan, in other words, if I just say I am going to move in in 2 months and never do is this something they(banks) actually check in on?

Also, my banker told me that I might be able to get approved for the higher mortgage over and above my 200,000 when including income from renters (other side of the duplex.

Also, on one side of the duplex is a 2 bedroom suite in the basement which is where I would live if I absolutely had too, but am not sure just how strict the regulations are or would be in this situation and if that would count as me living there.


Sorry if this is not too professional looking.
This is my first go and am honestly quite intimidated by you guys on here and look up to you....so go easy!!:)
Any thoughts would be incredibly appreciated.

Living in B.C. ,Prince George if that helps any and the property is in moderate/average condition.

Thanks.

Edit: I have not had time to find out if the utilities are included, I may have to assume they are not and may average in at around 250-300/month for Hydro and Gas knocking cash flow down to around 300/month.
 
Greatful, you may be grateful for this advice. If you were a REIN member, you would already know what I am about to say.If you are even moderately thinking about moving in temporarily, don`t give it another thought. What you are considering is FRAUD... in as big and as bold letters as this system will allow me to use.

You know going in that your plan is to not live there, and that you will be telling the lender you will in order to take advantage of better financing. That makes it fraud, and ILLEGAL. If you are willing to chance a jail term, go ahead with your plan. Could you get away with it? Sure, many do, and that is why non-professional mortgage brokers will recommend that stategy to you.

IGNORE THEIR ADVICE!!! Get a new MB if you get that advice. Oh, and BTW, if you do get charged with fraud, the MB who gave you that advice will deny ever having done so. They know it is illegal.

Have I made myself clear enough?
 
QUOTE (Dan_Eisenhauer @ Jun 21 2009, 06:12 PM) Greatful, you may be grateful for this advice. If you were a REIN member, you would already know what I am about to say.If you are even moderately thinking about moving in temporarily, don`t give it another thought. What you are considering is FRAUD... in as big and as bold letters as this system will allow me to use.

You know going in that your plan is to not live there, and that you will be telling the lender you will in order to take advantage of better financing. That makes it fraud, and ILLEGAL. If you are willing to chance a jail term, go ahead with your plan. Could you get away with it? Sure, many do, and that is why non-professional mortgage brokers will recommend that stategy to you.

IGNORE THEIR ADVICE!!! Get a new MB if you get that advice. Oh, and BTW, if you do get charged with fraud, the MB who gave you that advice will deny ever having done so. They know it is illegal.

Have I made myself clear enough?

Thanks Dan, appreciate it.
 
QUOTE (Greatful @ Jun 21 2009, 02:29 PM) Here are the details.I have been approved for a $200,000 Mortgage as a 1st time home buyer with nothing down.
However, I do not want to purchase a single family home to live in I would rather purchase a Duplex, rent it out and stay where I am (cheap living in a mobile home).
It is my understanding that I must actually live in the purchased home for whatever reason(guessing cause they don`t want my money going somewhere else other than the mortgage.

Heres the numbers.
Asking 289,000, I am going to assume I get it for 275,000...not unreasonable by any means over a 35 year loan with a 5 year 4.5% rate.

The rental income from this place is 2400/month.
My Mortgage will be $1320 per month.
Taxes are 280/month
Insurance 100/month
and 80/month for vacancy/repairs.

Totaling 1780 in outgoing and leaving me with a +cash flow of 620/month.

My main question is how strict are they in absolutely having to have you live there in order to get the loan, in other words, if I just say I am going to move in in 2 months and never do is this something they(banks) actually check in on?

Also, my banker told me that I might be able to get approved for the higher mortgage over and above my 200,000 when including income from renters (other side of the duplex.

Also, on one side of the duplex is a 2 bedroom suite in the basement which is where I would live if I absolutely had too, but am not sure just how strict the regulations are or would be in this situation and if that would count as me living there.


Sorry if this is not too professional looking.
This is my first go and am honestly quite intimidated by you guys on here and look up to you....so go easy!!:)
Any thoughts would be incredibly appreciated.

Living in B.C. ,Prince George if that helps any and the property is in moderate/average condition.

Thanks.

Edit: I have not had time to find out if the utilities are included, I may have to assume they are not and may average in at around 250-300/month for Hydro and Gas knocking cash flow down to around 300/month.

Hello;

Have you considered just purchasing the duplex and living in half of it? If the property is 1 building - meaning that is not seperately titled, then you may be totally legal with this purchase.

In fact, this is how I got my start - our first home was a run down mobile that we renovated and sold within 15 months, then we moved into a legal duplex - however it was all on 1 title. This, assuming that you clearly identify to your mortgage broker that the property has a second suite, is perfectly legal.

It is also a great way to buy cash flowing property, as you can purchase it with great owner occupied mortgages, live in the property for a couple years and then purchase another similar property. If you purchase right, you could essentially live mortgage free! However, you`ll have to do your homework concerning the legality of the suite or duplex you`re looking at. You want to ensure that your property is considered a `legal` suite or duplex - for many reasons...there is a lot of threads you can look at here that get deeper into that!

But never tell a lender that you`re going to move into a property if you have no real intention of doing that - it`s simply not worth the risk.

Good luck!
 
QUOTE (Greatful @ Jun 21 2009, 02:29 PM) Here are the details.
I have been approved for a $200,000 Mortgage as a 1st time home buyer with nothing down.
However, I do not want to purchase a single family home to live in I would rather purchase a Duplex, rent it out and stay where I am (cheap living in a mobile home).
It is my understanding that I must actually live in the purchased home for whatever reason(guessing cause they don`t want my money going somewhere else other than the mortgage.

Heres the numbers.
Asking 289,000, I am going to assume I get it for 275,000...not unreasonable by any means over a 35 year loan with a 5 year 4.5% rate.

The rental income from this place is 2400/month.
My Mortgage will be $1320 per month.
Taxes are 280/month
Insurance 100/month
and 80/month for vacancy/repairs.

Totaling 1780 in outgoing and leaving me with a +cash flow of 620/month.

My main question is how strict are they in absolutely having to have you live there in order to get the loan, in other words, if I just say I am going to move in in 2 months and never do is this something they(banks) actually check in on?

Also, my banker told me that I might be able to get approved for the higher mortgage over and above my 200,000 when including income from renters (other side of the duplex.

Also, on one side of the duplex is a 2 bedroom suite in the basement which is where I would live if I absolutely had too, but am not sure just how strict the regulations are or would be in this situation and if that would count as me living there.


Sorry if this is not too professional looking.
This is my first go and am honestly quite intimidated by you guys on here and look up to you....so go easy!!:)
Any thoughts would be incredibly appreciated.

Living in B.C. ,Prince George if that helps any and the property is in moderate/average condition.

Thanks.

Edit: I have not had time to find out if the utilities are included, I may have to assume they are not and may average in at around 250-300/month for Hydro and Gas knocking cash flow down to around 300/month.

I live in Prince George as well and that sounds pretty high. Where is it located? I agree with the previous posters. We pay a higher CMHC premium when we buy as a rental, but it is worth it to build an ethical business. I can hook you up with a broker in town that we use if you want.
 
Your numbers for expenses have left out many costs and are far too low for repairs.
You will not likely see any positive cash flow on this property.
 
Dan`s advice is the right advice, just don`t do it. If you`re buying an investment, then treat it as an investment.

If you`re preapproved for $200,000, then that is for a principal residence. It`s not possible to calculate the amount you`re preapproved for on a rental because withouth the cashflow, we don`t know the income and offset of the property.

It looks like you`ve got a decent property that you could use the income to qualify for a higher amount if you intend to live in it. Under CMHC guidelines, you will still have to put a minimum of 5% down. Was that your plan?

Are you working with a banker that has experience investing in real estate? How will this purchase affect your future plans to invest in real estate. If this taps out your debt servicing, what is your next move?

If you`d like some assistance, feel free to send me an email.
 
QUOTE (MitchCollins @ Jun 21 2009, 10:29 PM) Hello;
Have you considered just purchasing the duplex and living in half of it? If the property is 1 building - meaning that is not seperately titled, then you may be totally legal with this purchase.

In fact, this is how I got my start - our first home was a run down mobile that we renovated and sold within 15 months, then we moved into a legal duplex - however it was all on 1 title. This, assuming that you clearly identify to your mortgage broker that the property has a second suite, is perfectly legal.

It is also a great way to buy cash flowing property, as you can purchase it with great owner occupied mortgages, live in the property for a couple years and then purchase another similar property. If you purchase right, you could essentially live mortgage free! However, you`ll have to do your homework concerning the legality of the suite or duplex you`re looking at. You want to ensure that your property is considered a `legal` suite or duplex - for many reasons...there is a lot of threads you can look at here that get deeper into that!

But never tell a lender that you`re going to move into a property if you have no real intention of doing that - it`s simply not worth the risk.

Good luck!


Hey Mitch!
Yes, it is all under 1 title and have decided to live in the suite of 1 side until i decide other otherwise.
Thanks again Mitch...great input.
 
QUOTE (coinebro @ Jun 21 2009, 11:18 PM) I live in Prince George as well and that sounds pretty high. Where is it located? I agree with the previous posters. We pay a higher CMHC premium when we buy as a rental, but it is worth it to build an ethical business. I can hook you up with a broker in town that we use if you want.


Hey Coinbro,
I agree it is on the high side and is located near Spruceland.
Thanks for the Mortgage lead.
I am currently dealing with 2 mortgage brokers right now and am possibly going to see a third and would be very open to hear who you would suggest.
I am just trying to find a broker who "fits".
And so far I`m glad I have done this as there has been quite a large difference between the 2 so far, as one has previous experience in real estate investing, etc and the other does not.

I somehow let this thread slip away before getting back to you guys so not sure if you catch this thread again.
Keep in touch Coinbro, would love to hear your experiences!:)
 
QUOTE (invst4profit @ Jun 22 2009, 06:03 AM) Your numbers for expenses have left out many costs and are far too low for repairs.
You will not likely see any positive cash flow on this property.


Hey Invst4profit!
Your right, I have left out many costs from my initial post.

Here is a much more accurate run down....
Currently it is a duplex with a basement suite in one side.
Rents are 800, 750, and 700 = 2300.

The plan is to put in a second suite in the other side and rent out for 750 totaling 3000 in total potential rental income.
Purchase price of $285,000 plus 15,000 improvements =300,000
-15,000 down payment = loan of $285,000 with 3yr term @ 3.55% = $1181/mth mortgage

$3000
-1200 mortgage
-275 gas/heat
-157 Hydro
-85 city utilities
-125 Insurance
-281 Taxes
----------------
= 877 per month positive cash flow. (to be used for vacancy and repairs as needed.)


*currently the side with no suite is being rented at 850 plus they pay their own hydro, so I am going to reduce the rent down to 800 and pay hydro after installing the second basement suite.
The scenario above has taken this into consideration.
Rental goals are to eventually have upper suites @ 800 and lower suites @750 allowing for the potential increase of $100 eventually to allow for a total of $3100/month income or 977 posive cash flow.

You seem to always tell it like it is and would be glad to hear your input on this!

Thanks again for your time and input...much appreciated.
 
QUOTE (RobMacdonald @ Jun 24 2009, 09:38 PM) Are you working with a banker that has experience investing in real estate? How will this purchase affect your future plans to invest in real estate. If this taps out your debt servicing, what is your next move?

If you`d like some assistance, feel free to send me an email.


Great question Rob, "How will this purchase affect my future plans for investment?"
This is exactly the type of experience I am looking for in a mortgage broker.
I checked out your links and saw you do not deal with Prince George:(
 
$3000/month would not be terrible on a $300,000 investment but don`t count your chickens before they are hatched. Anything could happen preventing the additional income. Work with the $2300 as a base to analise this deal not $3000. The deal has to stand as it is not on what it might be.Expenses are always higher that a new LL expects. I say 50% of income will go to all expenses over the long term. If you chose to use 40% as expenses on $2300 does this still look like a good deal to you. How would you feel paying 6-7% on the mortgage.

Just things to consider.
 
QUOTE (invst4profit @ Aug 3 2009, 08:17 PM) $3000/month would not be terrible on a $300,000 investment but don`t count your chickens before they are hatched. Anything could happen preventing the additional income. Work with the $2300 as a base to analise this deal not $3000. The deal has to stand as it is not on what it might be.Expenses are always higher that a new LL expects. I say 50% of income will go to all expenses over the long term. If you chose to use 40% as expenses on $2300 does this still look like a good deal to you. How would you feel paying 6-7% on the mortgage.

Just things to consider.


Thanks I4P,...strong points and well taken.
 
Greatful you can call me at 250-981-1378 if you have any questions you want to discuss. Martin Krell is who I use in town.
 
QUOTE (coinebro @ Aug 4 2009, 07:47 AM) Greatful you can call me at 250-981-1378 if you have any questions you want to discuss. Martin Krell is who I use in town.


Awesome Coinbro, very much appreciated.
Might have to buy you lunch at Timmies sometime!:)
 
Hi Greatful,

Don`t let the areas on my website turn you away. I actually work with clients right across BC and even through Alberta. If you`d like to drop me an email offline, please do, I would be happy to discuss some options with you.

Technology is a wonderful thing, it makes working with the top professionals, whether it`s an accountant, consultant or lawyer, just a couple of clicks away.

Regards!
 
QUOTE (RobMacdonald @ Aug 7 2009, 01:29 PM) Hi Greatful,

Don`t let the areas on my website turn you away. I actually work with clients right across BC and even through Alberta. If you`d like to drop me an email offline, please do, I would be happy to discuss some options with you.

Technology is a wonderful thing, it makes working with the top professionals, whether it`s an accountant, consultant or lawyer, just a couple of clicks away.

Regards!
No pm`s I guess until I am a rein member so I am attempting to e-mail you.
Regards!
 
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