Second Property Financing: How to jump to improved primary residence in 1-5 years?

[Geoffrey]

Hi all,

In moving from a cheaper housing market to Victoria and currently renting, I can only afford a 400K condo as primary residence, which I will buy in the next 2 months. So, how to get ahead from that baseline?

Getting ahead from baseline for me/us means getting to a *nicer* condo or even a house (with rental suite) in the same city, hopefully within 1- 5 years. Current value of such a property would be 500k for a condo or 750K for a house.

I assume the market will continue to climb in the coming years. I can also assume income increase of 20K/a, principle paid on first property, and savings of about $1500-$2000/month. Selling the first condo would not be my chosen source of cash because of the advantages of the "buy and hold" strategy over the closing costs.

So the clear major challenge is how to finance the second property under this scenerio. Assuming market value increases of only 10% a year, a 500K condo would be 550K in 1 year. A 750K house would be 825K in one year.

How can we overtake the market without buying outside the city?

Readvanceable LOCs and second mortgages seem far too small to make the leap. Please tell me I'm wrong.

Thank you!

 

[Thomas Beyer]

A few options

 

[Thomas Beyer]

A few options

A) make more money i.e. take on a second job or have a partner with more income ( unclear if you are single or two incomes)
B) buy an ugly house, fix it up while living there, then sell it, tax free as 10% per year won't last so you have to add value to an asset and that is very very hard with a condo
C) buy further out as far as Sooke, Mill Bay or Sydney
D) buy a house with a suite and rent it
E) do a JV with someone that co-invests with you and co-qualifies for a mortgage
F) don't buy a condo - buy land as that is what goes up in value i.e. at least a TH or half-duplex or better a house perhaps even a rooming house or small multiplex say a six-plex
G) move to a cheaper city & tele-commute if possible

Did you talk to a mortgage broker ? What mortgage can you qualify for with

1) 20% or
2) less than 20%

down ?

 

[Geoffrey]

Hi Thomas, thanks for the tips. I'll consider each one at a time.

A) I'm working on that, with a small business to grow on the side, and hoping that extra income can be of use in applying for a second property down the road.
B)&D)&F) Problem is the market is practically empty of houses with rental suites, and searches under 450K yield no houses at all. I can wait for more inventory but then prices will climb before May as well.
C) Sooke, etc. would be good, but commuting into Victoria just isn't a viable long term lifestyle for me, esp. considering family reasons.
D) The JV idea is worth exploring. No CoSigners now but trusting someone enough to JV with is no small thing. I could ask a family member to cosign, but, is there a rule of thumb method for making it worth their while? Lot of risk incurred; what's in it for them other than Love & Christmas?
E) No telecommuting in my industry, but yes there might be some was to income stream that way.

 

[Geoffrey]

Forgot to answer, but today I learned that I should qualify for a 500K property. So that would be the limit. I'm thinking a nice condo with a room and bathroom to rent to a student is doable.