First Home w/ Rental Income

[rastallz]

Hi everyone,



I am planning on purchasing my first home after I finish university in about 4 months. I am hoping to get either a duplex or triplex so I can have some extra income from the other units and gain some experience in managing rental properties. I have a few questions I am hoping someone will have some answers to:



1) If a rental property (duplex/triplex) is going to be a principal residence, are the mortgage rules based on conventional mortgages or multi-unit properties? (ie. % downpayment)



2) When looking at TDS ratios, will they include a portion of rental income in calculations?



All help is very appreciated, all the best!

 

[MrHamilton]

[quote user=rastallz]

1) If a rental property (duplex/triplex) is going to be a principal residence, are the mortgage rules based on conventional mortgages or multi-unit properties? (ie. % downpayment)




Hello Rastallz, How is London these days? I graduated from the business school there ages ago



Since you are just starting out, I recommend you speak to a mortgage broker to help you understand how financing works and what you can afford based on your downpayment, income, credit score, etc... Here's the contact for Kevin who is a real estate investor and REIN member. He understands financing for investments and works with numerous REIN members.



Kevin Boughen, AMP

Mortgage Broker # M08007546

Dominion Lending Centres

Brokerage # 11890


25 Sheppard Ave W, Suite 300


Toronto, On, M2N 6S6



Office: 1.888.864.1677 ext 1

Fax: 1.888.502.3110

Mobile: 416.509.4047

Email: [email protected]



I'll leave the 2nd question to the financing experts on the forum but to answer the 1st, most lenders consider anything with four units or less (some go up to six) as residential so the financing process is generally much cheaper, less paper work, less scrutiny than multi-family/commercial financing.



All the best!

Erwin

 

[bizaro86]

I've never actually done this, but I believe if you're planning on living in a duplex you can still access CMHC under the personal residence rules (ie, 5% downpayment would be an option).



This would be something to talk about with a mortgage broker, and I absolutely second the advice to sit down with one and discuss you plans/goals/options.



Michael

 

[RobMacdonald]

You can buy any property up to 4 units and still be considered a residential property, underwritten with normal guidelines. Once you move to 5 units, then commercial rules apply.



There is a difference in downpayment for the types of properties you are looking at. For single unit or duplex, 5% is the minimum down payment. For triplex and fourplex, 10% is required.



Depending on the lender, you will be able to use as much as 100% of the income to assist in qualifying. In most cases the lenders will use between 50 to 80% of the income. I can't stress enough that it depends on the lender and the area you're borrowing in.

 

[MikeMcC874]

rastallz,



Please feel free to contact me if you need some contacts in London to talk to. I have a pretty good agent who owns a number of rentals and a friends wife who is a loan officer and Scotia. They should be able to answer most of you questions.



(Does the email feature work for non-members on the new forum?)



Mike

 

[rastallz]

Thanks for the replies everyone, I've gained alot of valuable information just in this brief discussion.



I will definitely get in touch with a mortgage broker and start putting a team together once I get closer to finishing school. I already understand how important realtionships are to succeed and really appreciate the contacts some of you have provided.



These questions are just to give me some direction as what to expect when I do speak to the professionals and better prepare myself. I just wanted to get some insight into down payments %'s and how rental income is included in TDS calculations.



Mike - I will definitely get in touch with you for some of your contacts. I really appreciate it!