I Am Looking For Your Expertise!

[Dominik Hekiert]

Hey Everyone, 

I am relatively new to the BP community but I have learned a lot of useful information in this short time. However, I am looking to get my first property and I am looking to get some general advice on how to achieve my goal of buying a residence in 2021. 

Insight into my situation:

• - I am based out of Ontario, Canada. 
  - I am looking for a property mainly in Windsor (lowest prices), London, Welland.
• - I am a 21 year old currently in my 4th year of university, my program is 6 years long
• - I work a part time and made roughly 35k in reportable income 
• - I have $30,000 saved for a down-payment 
• - I have a good standing credit score
• - I have still not filled out a mortgage pre-approval as I am waiting for the perfect time. 

What I am looking to invest in:

• - I am looking to possibly buy a run-down but rentable duplex in the Windsor area for $150,000-$250,000 to do a BRRR
• - I intend to hold onto this property long term and to be a part of my portfolio of residences in the future. 
• - I am hoping to take advantage of the first time home buyer incentive, needing to only put 5% down and living in a room of the residence. (This is possible for me since my work and school are remote)

What I want to know:

• - Is it possible for me to get a pre-approval to that extent if I do not put down 20% and report the rent as additional income
• - If this is the best way currently for me to start my journey into real estate or if there is a better option?
• - Would it make better sense to find a wholesale deal, pay the assignment fee directly and have the rest financed by the bank instead of looking on the mls.
• - Are there currently better markets than Windsor for low pricing in Ontario?

Thank you for reading and I hope we can all connect =)

[Jordan Perry]

Hey Dominik,

To answer your question, as far as conventional financing methods go, it depends on your current situation.

1.) First and foremost, make sure you know your credit score and that it is PERFECT.

As a real estate investor you will rely heavily on being able to get financing and if you have bad credit, it will make it very difficult and expensive to secure financing. If you have a credit card, pay it off every month. if you don't, get one, use it (they are great for saving up reward point too) and pay it off every month.

2. Make sure you don't have many other debts. About 400$ in monthly debt payments can translate into you not being able to get an extra $100,000 or so on your mortgage.

3.) As a young real estate investor, house hacking is an excellent strategy if your life will allow it. It will allow you to put much less of a down payment for the mortgage and give you a place to live, all the while, expose you to being a landlord and the ins and outs of home ownership.

4.) Make sure the property you are purchasing has GOOD CASHFLOW. The banks like to see that the property is and will be operating well. Most lenders assume 50% of the income will go to expenses, and the rest needs to be able to cover the mortgage. Whatever is left after that, may be able to be used as income for you to help you secure a loan.

5.) Always UNDERWRITE CONSERVATIVELY. No matter now conservative you think you are being, the bank is more conservative. Know your local vacancy rates and CAP rates.

6.) Where does your income come from? Lenders want to see good stable income with a good history. If you are new at a job, lenders typically want to se a few years at your position to make them feel secure. If you don't have a steady job with history, financing will be difficult.

To directly answer your questions:

• - Is it possible for me to get a pre-approval to that extent if I do not put down 20% and report the rent as additional income
• - The additional rent will help your income a bit. 
• - If this is the best way currently for me to start my journey into real estate or if there is a better option?
• - This is a good option for you to get a place in ontario to live, but there is always the possibility of investing out of province in much cheaper markets. There is a wealth of knowledge on Biggerpockets here about this. I have experience with this is you would ever like to chat. 
• - Would it make better sense to find a wholesale deal, pay the assignment fee directly and have the rest financed by the bank instead of looking on the MLS.
• -This is a hard question to answer as it really depends on the deal. If you can pay the assignment fee and have some cash left over to finance, then maybe yes. It is still possible to get good deals without having to pay for it, but you have to be ever vigilant and have a good real estate agent to help. 
• - Are there currently better markets than Windsor for low pricing in Ontario?
• -Not sure about this as I do not currently invest in Ontario myself. Maybe someone else on the forums can jump in here and lend their expertise? 

And on top of all of that, once you are ready, contact a mortgage broker that understands real estate investors (Me if you'd like) to get a free consultation on what your goals are and how to get there!

Hope that helps!