First Time Home Owner Req. Assistance

[Jordansbc427]

Hello,



I would like to start off by introducing myself. I am a 23 year old male, born and raised in alberta. Currently I live in a small town east of red deer and rent from my brother for $300 dollars a month. I have briefly been introduced to real estate by a fellow co-worker. He recommended me the books, "Rich Dad Poor Dad", and "Real Estate Investing In Canada." I have never considered investing in real estate until I finished reading these books and saw the long term wealth that can be created through it. Personally I don't believe in RRSP's....I would much rather retire off the wealth I create and learn something along the way. Although, I found the information in "Real Estate Investing In Canada" to be a bit overwhelming, most likely because all of this is new to me.



I have found a lot of useful information throughout these forums, but most of it pertaining to rental properties....which I eventually plan on owning. My first goal is to find a house of my own to live in but at the same time have my mortgage covered by renters, and hopefully making some kind of positive cash flow. I am looking in the SE area of Calgary, Auburn Bay to be Exact. I have found a house I am interested in and it is a prox $500,000. 6+ Bedroom, 4 bathrooms, double attached garage. The area has alot of major highway construction going on and the new south health hospital opening in the area, and also plans of a school opening in 2015 (....plans of course).



Am I nuts to be looking at a $500,000 house as a first time buyer? Especially when the mortgage amortization just dropped from 30 years to 25...



Is the best thing to do in this situation is to just become a spunge...get out there ask as many questions as possible, to hopefully the correct and most knowledgeable people?



Any help is greatly appreciated.



Thank you, Jordan.

 

[Thomas Beyer]

Step 1: maximize your income and focus on your career [ what is it btw ?] Keep renting until you have saved about 10% of an anticipated home purchase price as 5% down with fees is like renting from the bank. Reduce your expectations fora first time home. $500,000 with six bedrooms, please ?
Step 2: go to a mortgage broker to find out the maximum mortgage you can get, assuming 10% down in cash.
Step 3: get some roommates to help subsidize this mortgage payment.
Step 4, or 2b, if you don't like the low maximum loan amount of step 2: find a co-qualifier that trusts you so you can increase the house size, likely in exchange for an equity participation in future value upside.

 

[housingrental]

I would not recommend needing to have a roommate when buying a house.

This is great, until it is not.

At that point you pay more to have a lower quality of life, with more risk, and less flex ability.

Rent until you have enough $ that you can cover the property on your own. You can also purchase a duplex.

At most rent to a roommate only as an optional supplement to income, on short term leases.

 

[Jordansbc427]

Thank you for the quick replies. I have a fairly good job at the moment, taking home aprox $12,000 a month as an Instrument Technician (Oilfield Based). I have been saving for quite a while now and have a reasonable amount of $ built up. I just don't see the point in purchasing a $300,000 dollar house with 2 beds 2 bath, or a $430,000 with 3 bed 2 bath. For $70,000 more i could have 3 to 4 more bedrooms to rent out for that much more money....but then the headache of that many more room mates to live with. Could you please go into detail with regards to the "co-qualifier."



Thank you, Jordan.



.

 

[housingrental]

Buy the cheaper option and do not have room mates

 

[Thomas Beyer]

With this income no co-qualifier is required. Talk to a mortgage broker and get preapproved for a mortgage. Then decide what kind of house, with or without roommates, makes sense for the next five years of your life. Perhaps a 4-plex where you occupy one suite and rent the other three, perhaps a small house as Adam suggested, or perhaps an acreage. It's a life style choice with an investment aspect. Many options - Good for you !! [ btw: The daughter of a friend is an instrument technician looking for a better job. Could she contact you to chat & explore options in that field ?]

 

[Jordansbc427]

Thank you both for the advice, i'm sure it will help to point me in the right direction. As for the instrumentation position thomas, you can have her contact me at 1-403-741-4884 anytime after 6:00 pm would be fine and i will help as much as i can.

 

[Sherilynn]

Further to what has already been said...



Your personal mortgage will count against your debt coverage ratio and a large mortgage will inhibit your ability to buy other properties because you will be unable to count income from rented rooms against that debt. Only income from self-contained suites (including legal basement suites) can be used to offset your mortgage.

 

[markl]

Hi Jordan,



Just a question is some of the motivation to get out of your brothers house? If not why not buy a straight up rental property and stay living with your bro for $300 per month and continue to save for another rental property. You make good income and you could set yourself up financially for the rest of your life by adding a property per year for the next 5 years.



Regards,

 

[Jordansbc427]

This is very good information to know Sherilynn, Thank you. I have strayed away from the $500,000 dollar price range. I figure that I could purchase a house for the $350,000 range with a possible renter. and then purchase strictly a rental property with the extra cash saved and begin from there.



I have considered staying living with my brother for that cheap price of $300 dollars. Currently he doesn't live there and will be moving in with his girlfriend and two kids so....Its's time I find a place of my own anyways.



Thank you, Jordan.

 

[Sherilynn]

I do like the idea of a side-by-side duplex, four-plex, or legal up/down if you can find one that you would like to live in.



They qualify as a personal residence for CMHC insured mortgages; you get verifiable income that you can use to offset the mortgage; and when you are ready to upgrade to a new personal residence you can convert the whole thing to an excellent rental.



This is how we got started. In fact, we bought several up/downs with low downpayments and purchase + improvements mortgages. We lived in one suite while our contractors upgraded the other suite; then we rented out the other suite; and then we found another property and did it again. Lather, rinse, repeat. We even sold one for a ridiculous profit and the entire gain fell under the personal residence tax exemption, giving us a huge down payment for our more permanent personal residence.