I`m about to buy 1st properties & wanted feedback on the low (5-10%??) down new program with CMHC (w/ higher interest & insurance?). How do I crunch numbers or do a rough analysis of whether to spread the cash I have for down over 4, 10% down properties vs. 2, 20% down properties as the low down has it`s own drawbacks (besides lower cash flow-let`s assume it`ll still cash flow w/ 10% down)?? Should I just go use up my down on 20% down for starters as "most" of the time/cases it`s better that way?? I heard some investors sometimes regret not spreading out their down so they could have bought more. THanks for your time.
Spread cash on low down or do 20% conventional?
- Thread starter donksky
- Start date
- Joined
- Oct 10, 2007
- Messages
- 601
Hi Donna, it is best to speak to a good mortgage broker who will crunch the numbers for you and also explain to you how it is done. Work on the numbers with him before you have the property.
I am also working on my first property - offer is accepted. My broker provided me with some formulas that I need to make sense of first and then orginize and I can share them with you.
Make sure the broker understands your long term plan and you both look well beyond the first deal.
I am also working on my first property - offer is accepted. My broker provided me with some formulas that I need to make sense of first and then orginize and I can share them with you.
Make sure the broker understands your long term plan and you both look well beyond the first deal.
- Joined
- Oct 24, 2007
- Messages
- 2,289
QUOTE (donksky @ Jan 15 2008, 09:50 AM) I`m about to buy 1st properties & wanted feedback on the low (5-10%??) down new program with CMHC (w/ higher interest & insurance?). How do I crunch numbers or do a rough analysis of whether to spread the cash I have for down over 4, 10% down properties vs. 2, 20% down properties as the low down has it`s own drawbacks (besides lower cash flow-let`s assume it`ll still cash flow w/ 10% down)?? Should I just go use up my down on 20% down for starters as "most" of the time/cases it`s better that way?? I heard some investors sometimes regret not spreading out their down so they could have bought more. THanks for your time.
My partner and I try to use as little cash down as we can so that we can buy more.
If you looked at the money made by posetive cash flow vs. the money made by capital appreciation the big money is in having more properties.
There are trade-offs... namely qualification and approval if you have a significant amount of negative cash flow it will hurt your DSR and make it tougher to qualify..
Buuuut... when you have more properties it`s easier to convince money partners to join up with you and you can use them to help in your approval. It`s a choice you`ll have to make for yourself. Personally, I think you`re better off putting as little down as possible and buying more... build in a 3 year `cash reserve` with your partners and go from there! You will be able to give them better returns too since you will be more highly leveraged... just make sure you buy in the right area at the right price!
My partner and I try to use as little cash down as we can so that we can buy more.
If you looked at the money made by posetive cash flow vs. the money made by capital appreciation the big money is in having more properties.
There are trade-offs... namely qualification and approval if you have a significant amount of negative cash flow it will hurt your DSR and make it tougher to qualify..
Buuuut... when you have more properties it`s easier to convince money partners to join up with you and you can use them to help in your approval. It`s a choice you`ll have to make for yourself. Personally, I think you`re better off putting as little down as possible and buying more... build in a 3 year `cash reserve` with your partners and go from there! You will be able to give them better returns too since you will be more highly leveraged... just make sure you buy in the right area at the right price!
- Joined
- Sep 11, 2007
- Messages
- 462
QUOTE (donksky @ Jan 15 2008, 10:50 AM) I`m about to buy 1st properties & wanted feedback on the low (5-10%??) down new program with CMHC (w/ higher interest & insurance?). How do I crunch numbers or do a rough analysis of whether to spread the cash I have for down over 4, 10% down properties vs. 2, 20% down properties as the low down has it`s own drawbacks (besides lower cash flow-let`s assume it`ll still cash flow w/ 10% down)?? Should I just go use up my down on 20% down for starters as "most" of the time/cases it`s better that way?? I heard some investors sometimes regret not spreading out their down so they could have bought more. THanks for your time.
You`ll want to start with your 5 year plan - how many properties do you plan on buying? Over how long? How much downpayment is available to you? What is your personal financing situation? Do you need JV`s? Once you know those things, you can determine how much you want to put down on each purchase. Once you know that, you`ll be able to calculate the premium based on the amount down. (the rates are not higher)
Probably not a good idea to start building a high ratio portfolio until you`ve gone over your 5 year plan and long term financing strategy with your broker. Starting out your portfolio with negative cash flow, high ratio properties could easily ruin your ability to get financing in the future - and your ability to carry out your 5 year plan.
You`ll want to start with your 5 year plan - how many properties do you plan on buying? Over how long? How much downpayment is available to you? What is your personal financing situation? Do you need JV`s? Once you know those things, you can determine how much you want to put down on each purchase. Once you know that, you`ll be able to calculate the premium based on the amount down. (the rates are not higher)
Probably not a good idea to start building a high ratio portfolio until you`ve gone over your 5 year plan and long term financing strategy with your broker. Starting out your portfolio with negative cash flow, high ratio properties could easily ruin your ability to get financing in the future - and your ability to carry out your 5 year plan.