Hello all. I am looking for advice. I am new to the world or Real Estate investing. I`ve read the books, listened to audio cd`s and have actually done the due diligence and property analyzer form on three properties in my area of St. Thomas, ON. I have narrowed my search to a duplex where all the numbers look good and I would have a monthly cash flow of $275+ per month as the current tennants pay all utilities. Many major upgrades have already been completed. I don`t have the 20% required for the down payment - roughly 10% only. The vendor has offered to carry the other 10% as a second mortgage. Projected purchase price of the duplex is $155,000. I`m looking for advice on how to move forward - any suggestions, ideas, comments would be greatly appreciated.
Asking for advice/help
- Thread starter ustorm00
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QUOTE (ustorm00 @ Nov 25 2010, 08:03 PM)
I don't have the 20% required for the down payment - roughly 10% only. The vendor has offered to carry the other 10% as a second mortgage. ..
banks may lend 80% .. or may not with a 10% 2nd .. 90% is too high a leverage for cash-flow most likely !
Do you own your own home ?
related posts to get started:
5 ways to make money http://myreinspace.com/public_forums/General_Discussion/61-3347-5_ways_to_make_money.html
Success Tips for the real estate journey: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16722-Love_what_you_do_-_Do_what_you_love_.html
How to get started http://myreinspace.com/public_forums/General_Discussion/61-4391-How_to_get_started_.html
I don't have the 20% required for the down payment - roughly 10% only. The vendor has offered to carry the other 10% as a second mortgage. ..
banks may lend 80% .. or may not with a 10% 2nd .. 90% is too high a leverage for cash-flow most likely !
Do you own your own home ?
related posts to get started:
5 ways to make money http://myreinspace.com/public_forums/General_Discussion/61-3347-5_ways_to_make_money.html
Success Tips for the real estate journey: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16722-Love_what_you_do_-_Do_what_you_love_.html
How to get started http://myreinspace.com/public_forums/General_Discussion/61-4391-How_to_get_started_.html
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QUOTE (ustorm00 @ Nov 25 2010, 08:03 PM) Hello all. I am looking for advice. I am new to the world or Real Estate investing. I`ve read the books, listened to audio cd`s and have actually done the due diligence and property analyzer form on three properties in my area of St. Thomas, ON. I have narrowed my search to a duplex where all the numbers look good and I would have a monthly cash flow of $275+ per month as the current tennants pay all utilities. Many major upgrades have already been completed. I don`t have the 20% required for the down payment - roughly 10% only. The vendor has offered to carry the other 10% as a second mortgage. Projected purchase price of the duplex is $155,000. I`m looking for advice on how to move forward - any suggestions, ideas, comments would be greatly appreciated.More details would help such as gross rents, utilities extra or inclusive, P. tax, nieghbourhood-A, B, or C class, what is the current tenant profile, what are the recent sold comps, Is this duplex going to be your residence as well? If so financing becomes much easier.
What do you call monthly cash flow? Have you included vacancy, property management, repairs and maintenance, what major or minor upgrades are needed.
If you are having difficulty getting financing make sure you have very good cash flow to make it worthwhile pursueing.
What do you call monthly cash flow? Have you included vacancy, property management, repairs and maintenance, what major or minor upgrades are needed.
If you are having difficulty getting financing make sure you have very good cash flow to make it worthwhile pursueing.
QUOTE (EdRenkema @ Nov 26 2010, 09:54 AM)
More details would help such as gross rents, utilities extra or inclusive, P. tax, nieghbourhood-A, B, or C class, what is the current tenant profile, what are the recent sold comps, Is this duplex going to be your residence as well? If so financing becomes much easier. What do you call monthly cash flow? Have you included vacancy, property management, repairs and maintenance, what major or minor upgrades are needed. If you are having difficulty getting financing make sure you have very good cash flow to make it worthwhile pursueing.
More details would help such as gross rents, utilities extra or inclusive, P. tax, nieghbourhood-A, B, or C class, what is the current tenant profile, what are the recent sold comps, Is this duplex going to be your residence as well? If so financing becomes much easier. What do you call monthly cash flow? Have you included vacancy, property management, repairs and maintenance, what major or minor upgrades are needed. If you are having difficulty getting financing make sure you have very good cash flow to make it worthwhile pursueing.
Thank you for your reply. Gross rent is 1450/mth. Tenants pay ALL utilities. Property taxes are $1850 and I would class the neighbourhood as a C to B and the tenant profile as the same. This duplex will be for investment purpose only as I own my own home. The cash flow I mentioned (275/mth) was after mortgage, property taxes, insurance, property management, vacancy allowance and repair and maintenance allowances taken into effect. There are no major repairs needed as it has recently had a newer roof, furnace, wiring, windows completed. We recently built our primary residence and do not have enough equity into it to pull from.
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Looks great provided that:
Your numbers are accurate - it might be helpful for you to post all of them in detail for others to provide perspective
The revenue stream is stable - can you consistently collect rent and keep property rented at those rates
There isn`t significant deferred maintenance
You have sufficient cash flow from your personal job to subsidize operations from the property when things go wrong - newer roof leaks unexpectedly and you need to come up with a few thousand + tenant bailing, etc...
Purchasing a duplex when you have only 10% down payment can provide great returns if things go well... but if you don`t have funds to draw from elsewhere in the even you need it there is the potential for a lot of pain too
Your numbers are accurate - it might be helpful for you to post all of them in detail for others to provide perspective
The revenue stream is stable - can you consistently collect rent and keep property rented at those rates
There isn`t significant deferred maintenance
You have sufficient cash flow from your personal job to subsidize operations from the property when things go wrong - newer roof leaks unexpectedly and you need to come up with a few thousand + tenant bailing, etc...
Purchasing a duplex when you have only 10% down payment can provide great returns if things go well... but if you don`t have funds to draw from elsewhere in the even you need it there is the potential for a lot of pain too
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QUOTE (ThomasBeyer @ Nov 26 2010, 01:45 AM)
banks may lend 80% .. or may not with a 10% 2nd .. 90% is too high a leverage for cash-flow most likely !
Do you own your own home ?
related posts to get started:
5 ways to make money http://myreinspace.com/public_forums/General_Discussion/61-3347-5_ways_to_make_money.html
Success Tips for the real estate journey: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16722-Love_what_you_do_-_Do_what_you_love_.html
How to get started http://myreinspace.com/public_forums/General_Discussion/61-4391-How_to_get_started_.html
Hi Thomas,
I was of the impression that with a VTB the banks wanted a minimum 15% down? Can any mortgage brokers out there comment on this?
As for Ed's and Adam's comments they are bang on. In addition to the downpayment you need to have the necessary reserve fund in place. Remember Murphy's Law!
Regards...Randy
banks may lend 80% .. or may not with a 10% 2nd .. 90% is too high a leverage for cash-flow most likely !
Do you own your own home ?
related posts to get started:
5 ways to make money http://myreinspace.com/public_forums/General_Discussion/61-3347-5_ways_to_make_money.html
Success Tips for the real estate journey: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16722-Love_what_you_do_-_Do_what_you_love_.html
How to get started http://myreinspace.com/public_forums/General_Discussion/61-4391-How_to_get_started_.html
Hi Thomas,
I was of the impression that with a VTB the banks wanted a minimum 15% down? Can any mortgage brokers out there comment on this?
As for Ed's and Adam's comments they are bang on. In addition to the downpayment you need to have the necessary reserve fund in place. Remember Murphy's Law!
Regards...Randy
- Joined
- Nov 26, 2010
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QUOTE (RandyDalton @ Nov 26 2010, 09:53 AM)
Hi Thomas,
I was of the impression that with a VTB the banks wanted a minimum 15% down? Can any mortgage brokers out there comment on this?
As for Ed's and Adam's comments they are bang on. In addition to the downpayment you need to have the necessary reserve fund in place. Remember Murphy's Law!
Regards...Randy
Yes, only a few banks allow VTB as part of down payments. With 15% down your most likely talking about TD. Home Trust and Merix will allow 10% down with a 10% VTB.
Another consideration is getting a mortgage with a VTB then refinancing it all out the next day.
Before your purchase, get an appraisal. If the appraisal comes out higher, you can go to the bank the next day after your original purchase and refi up to 80% of the new appraisal amount. Why would you want to do this? To get the lowest mortgage mortgage payment. If you have a mortgage of $140,000. The lowest payment for this is $140,000 x 2.25% / 12 months = $292/month.
This is what I use of my triplex/fourplex in Winnipeg.
Here is more detailed blog post on how it works: http://realtorassist.ca/blog/what-lowest-m...ment-available/
Robert Klein
Mortgage Broker and Real Estate Investor
www.RealtorAssist.ca
778 896 6732
[email protected]
Hi Thomas,
I was of the impression that with a VTB the banks wanted a minimum 15% down? Can any mortgage brokers out there comment on this?
As for Ed's and Adam's comments they are bang on. In addition to the downpayment you need to have the necessary reserve fund in place. Remember Murphy's Law!
Regards...Randy
Yes, only a few banks allow VTB as part of down payments. With 15% down your most likely talking about TD. Home Trust and Merix will allow 10% down with a 10% VTB.
Another consideration is getting a mortgage with a VTB then refinancing it all out the next day.
Before your purchase, get an appraisal. If the appraisal comes out higher, you can go to the bank the next day after your original purchase and refi up to 80% of the new appraisal amount. Why would you want to do this? To get the lowest mortgage mortgage payment. If you have a mortgage of $140,000. The lowest payment for this is $140,000 x 2.25% / 12 months = $292/month.
This is what I use of my triplex/fourplex in Winnipeg.
Here is more detailed blog post on how it works: http://realtorassist.ca/blog/what-lowest-m...ment-available/
Robert Klein
Mortgage Broker and Real Estate Investor
www.RealtorAssist.ca
778 896 6732
[email protected]
Thanks everyone for your comments. It looks like I will hold off for now until I can find extra funds so I can achieve the 20% down requirement. I don`t want the emotions of trying to get that first property to fog reality. If I exhaust all my capital to start and something were to occur I may be in trouble. As Randy said, Murphy`s Law!
- Joined
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QUOTE (ustorm00 @ Nov 26 2010, 09:36 AM)
Thank you for your reply. Gross rent is 1450/mth. Tenants pay ALL utilities. Property taxes are $1850 and I would class the neighbourhood as a C to B and the tenant profile as the same. This duplex will be for investment purpose only as I own my own home. The cash flow I mentioned (275/mth) was after mortgage, property taxes, insurance, property management, vacancy allowance and repair and maintenance allowances taken into effect. There are no major repairs needed as it has recently had a newer roof, furnace, wiring, windows completed. We recently built our primary residence and do not have enough equity into it to pull from.
Looks like a decent deal !!
Next steps:
A) get property under contract with 10% down and 10% VTB .. Subject to financing ... at least 2 weeks !
B) talk to a mortgage broker to see if you can get 80% new financing .. Given your income and this 10% VTB
Then decide to waive conditions or not !!
Thank you for your reply. Gross rent is 1450/mth. Tenants pay ALL utilities. Property taxes are $1850 and I would class the neighbourhood as a C to B and the tenant profile as the same. This duplex will be for investment purpose only as I own my own home. The cash flow I mentioned (275/mth) was after mortgage, property taxes, insurance, property management, vacancy allowance and repair and maintenance allowances taken into effect. There are no major repairs needed as it has recently had a newer roof, furnace, wiring, windows completed. We recently built our primary residence and do not have enough equity into it to pull from.
Looks like a decent deal !!
Next steps:
A) get property under contract with 10% down and 10% VTB .. Subject to financing ... at least 2 weeks !
B) talk to a mortgage broker to see if you can get 80% new financing .. Given your income and this 10% VTB
Then decide to waive conditions or not !!
- Joined
- Nov 26, 2010
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- 23
QUOTE (ThomasBeyer @ Nov 27 2010, 12:53 PM)
Looks like a decent deal !!
Next steps:
A) get property under contract with 10% down and 10% VTB .. Subject to financing ... at least 2 weeks !
B) talk to a mortgage broker to see if you can get 80% new financing .. Given your income and this 10% VTB
Then decide to waive conditions or not !!
With a 10% VTB, you can't get access to interest only mortgage payments to maximize cash flow. If you are purchasing under appraised value you can do the following:
1) Get an appraisal that is First Line Approved
2) Get a variable mortgage with a bank that accepts 10% VTB. //For rentals TD finances at 75% LTV, Merix 80% LTV with VTB
3) Next day after taking title, apply for an interest only mortgage at First Line @ 2.25% at your new appraised value
4) The VTB should get paid back, but most importantly you have an interest only mortgage.
If you can structure these types of deals, attracting JV partners becomes significantly easier.
More about interest only here: http://realtorassist.ca/blog/what-lowest-m...ment-available/
I have an 8 minute video on it at the end of how I figured it out.
How much is your expected mortgage, I can reply back with what the payment would look like
Hope that helps
Robert Klein
Mortgage Broker and Real Estate Investor
www.RealtorAssist.ca
778 896 6732
[email protected]
Looks like a decent deal !!
Next steps:
A) get property under contract with 10% down and 10% VTB .. Subject to financing ... at least 2 weeks !
B) talk to a mortgage broker to see if you can get 80% new financing .. Given your income and this 10% VTB
Then decide to waive conditions or not !!
With a 10% VTB, you can't get access to interest only mortgage payments to maximize cash flow. If you are purchasing under appraised value you can do the following:
1) Get an appraisal that is First Line Approved
2) Get a variable mortgage with a bank that accepts 10% VTB. //For rentals TD finances at 75% LTV, Merix 80% LTV with VTB
3) Next day after taking title, apply for an interest only mortgage at First Line @ 2.25% at your new appraised value
4) The VTB should get paid back, but most importantly you have an interest only mortgage.
If you can structure these types of deals, attracting JV partners becomes significantly easier.
More about interest only here: http://realtorassist.ca/blog/what-lowest-m...ment-available/
I have an 8 minute video on it at the end of how I figured it out.
How much is your expected mortgage, I can reply back with what the payment would look like
Hope that helps
Robert Klein
Mortgage Broker and Real Estate Investor
www.RealtorAssist.ca
778 896 6732
[email protected]
- Joined
- Nov 26, 2010
- Messages
- 23
QUOTE (ustorm00 @ Nov 27 2010, 12:27 PM)
Thanks everyone for your comments. It looks like I will hold off for now until I can find extra funds so I can achieve the 20% down requirement. I don't want the emotions of trying to get that first property to fog reality. If I exhaust all my capital to start and something were to occur I may be in trouble. As Randy said, Murphy's Law!
If you are buying at the right amount, you can refinance the property the next day and take out your down payment. Do you know what the appraised value of the property is?
Robert Klein
Mortgage Broker and Real Estate Investor
www.RealtorAssist.ca
778 896 6732
[email protected]
Thanks everyone for your comments. It looks like I will hold off for now until I can find extra funds so I can achieve the 20% down requirement. I don't want the emotions of trying to get that first property to fog reality. If I exhaust all my capital to start and something were to occur I may be in trouble. As Randy said, Murphy's Law!
If you are buying at the right amount, you can refinance the property the next day and take out your down payment. Do you know what the appraised value of the property is?
Robert Klein
Mortgage Broker and Real Estate Investor
www.RealtorAssist.ca
778 896 6732
[email protected]
We just did a 90% on a triplex in Hamilton the lender was equitable trust and the mortgage broker who helped put the deal together is Kevin Boughen [email protected]
Looks like a good deal you just need to get your team moving to complete it.
Good Luck
Looks like a good deal you just need to get your team moving to complete it.
Good Luck
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- 2,880
QUOTE (ThomasBeyer @ Nov 26 2010, 12:45 AM) banks may lend 80% .. 90% is too high a leverage for cash-flow most likely !
Hi Thomas,
small math correction: when buying a property under 200K the difference in the monthly mortgage payment between 80% loan and 90% is only around $50!! so as long as cash flow > $50/mo with 80% LTV, a positive cash flow will also be generated with 90% LTV.
Many properties easily generate positive cash flow with 90% LTV even when calculated conservatively (with the conservative assumption of `50% of rent = expenses before financing`). I personally viewed and analyzed many of them. The challenge as you mentioned is to obtain 90% financing but that`s a different issue.
Regards,
N.
Hi Thomas,
small math correction: when buying a property under 200K the difference in the monthly mortgage payment between 80% loan and 90% is only around $50!! so as long as cash flow > $50/mo with 80% LTV, a positive cash flow will also be generated with 90% LTV.
Many properties easily generate positive cash flow with 90% LTV even when calculated conservatively (with the conservative assumption of `50% of rent = expenses before financing`). I personally viewed and analyzed many of them. The challenge as you mentioned is to obtain 90% financing but that`s a different issue.
Regards,
N.
QUOTE (RealtorAssist @ Nov 27 2010, 02:16 PM)
If you are buying at the right amount, you can refinance the property the next day and take out your down payment. Do you know what the appraised value of the property is?
I'm not sure what the appraised value of the property is yet, but the expected purchase price is $159,900.
If you are buying at the right amount, you can refinance the property the next day and take out your down payment. Do you know what the appraised value of the property is?
I'm not sure what the appraised value of the property is yet, but the expected purchase price is $159,900.
QUOTE (markl @ Nov 27 2010, 08:38 PM)
We just did a 90% on a triplex in Hamilton the lender was equitable trust and the mortgage broker who helped put the deal together is Kevin Boughen [email protected]
Looks like a good deal you just need to get your team moving to complete it.
Good Luck
Thanks Mark for the insight. Would there be any problem with me contacting Kevin? This may be what I need to get going.
Thanks,
Jamie
We just did a 90% on a triplex in Hamilton the lender was equitable trust and the mortgage broker who helped put the deal together is Kevin Boughen [email protected]
Looks like a good deal you just need to get your team moving to complete it.
Good Luck
Thanks Mark for the insight. Would there be any problem with me contacting Kevin? This may be what I need to get going.
Thanks,
Jamie
QUOTE (ThomasBeyer @ Nov 27 2010, 01:53 PM)
Looks like a decent deal !!
Next steps:
A) get property under contract with 10% down and 10% VTB .. Subject to financing ... at least 2 weeks !
B) talk to a mortgage broker to see if you can get 80% new financing .. Given your income and this 10% VTB
Then decide to waive conditions or not !!
Thank you Thomas. I appreciate the advise.
Jamie
Looks like a decent deal !!
Next steps:
A) get property under contract with 10% down and 10% VTB .. Subject to financing ... at least 2 weeks !
B) talk to a mortgage broker to see if you can get 80% new financing .. Given your income and this 10% VTB
Then decide to waive conditions or not !!
Thank you Thomas. I appreciate the advise.
Jamie
- Joined
- Nov 26, 2010
- Messages
- 23
QUOTE (ustorm00 @ Nov 28 2010, 08:16 PM) I`m not sure what the appraised value of the property is yet, but the expected purchase price is $159,900.
If you can get an appraisal 10% to 20% higher then your purchase cost, you can refinance the next day and get a portion of your equity out.
In terms of cash flow, based on a $159,000 purchase price with a 20% down payment, you will be left with a $ $127,200 mortgage.
If you got a traditional variable mortgage, the rate would be around 2.3% amortized at 35 years. The payment would be $441/month.
If you qualified for interest only @ 2.3%, the payment would would look like: $127,200 x .023 / 12 months = $243/month.
This would increase your cash flow from $275/month to $275/month + ($441 - $243)/month = $473/month
This type of interest only is difficult to get, but if a person can qualify for it, it`s great. If you had 3 to 10 rentals, this program would be much easier as the banks will view you based on a Debt Coverage Ratio of 1.2.
Robert Klein
Mortgage Broker, Real Estate Investor,
Founder of RealtorAssist.ca
A: 2465 Bellevue Avenue
West Vancouver, BC, V7V 1E1
C: 778.896.6732 | F:604.648.9701
Email: [email protected]
Last Blog Post: http://realtorassist.ca/blog/what-lowest-m...ment-available/
If you can get an appraisal 10% to 20% higher then your purchase cost, you can refinance the next day and get a portion of your equity out.
In terms of cash flow, based on a $159,000 purchase price with a 20% down payment, you will be left with a $ $127,200 mortgage.
If you got a traditional variable mortgage, the rate would be around 2.3% amortized at 35 years. The payment would be $441/month.
If you qualified for interest only @ 2.3%, the payment would would look like: $127,200 x .023 / 12 months = $243/month.
This would increase your cash flow from $275/month to $275/month + ($441 - $243)/month = $473/month
This type of interest only is difficult to get, but if a person can qualify for it, it`s great. If you had 3 to 10 rentals, this program would be much easier as the banks will view you based on a Debt Coverage Ratio of 1.2.
Robert Klein
Mortgage Broker, Real Estate Investor,
Founder of RealtorAssist.ca
A: 2465 Bellevue Avenue
West Vancouver, BC, V7V 1E1
C: 778.896.6732 | F:604.648.9701
Email: [email protected]
Last Blog Post: http://realtorassist.ca/blog/what-lowest-m...ment-available/
- Joined
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- Messages
- 13,879
QUOTE (RealtorAssist @ Nov 28 2010, 08:07 PM) If you can get an appraisal 10% to 20% higher then your purchase cost, you can refinance the next day .
...
not usually .. don`t banks require you to wait 6+ months ?
...
not usually .. don`t banks require you to wait 6+ months ?
- Joined
- Nov 26, 2010
- Messages
- 23
QUOTE (ThomasBeyer @ Nov 28 2010, 09:27 PM) not usually .. don`t banks require you to wait 6+ months ?
Hi Thomas,
that is true for most banks. Firstline is investor friendly and they understand investors buying undervalue, so all they need is an appraisal to move forward.
Rob
Hi Thomas,
that is true for most banks. Firstline is investor friendly and they understand investors buying undervalue, so all they need is an appraisal to move forward.
Rob