I have $75K and I want to buy multiple properties – thoughts?

Question

I'm based in Nova Scotia, Canada, and I'm 26 with about $75K in savings and I'm wondering how to make this money go the furthest. I'm house hacking for my first property, which I expect to be around $250-350K, and the secondary unit should rent for $1000-1200/mo. That's on par with most of the properties I've looked at and put offers on (we're in a highly competitive market, I'm 0/3 so far!).

Because it's my first property, I only need to be 5% down. So including closing costs, I need around $22,500 for property #1.

Now I had planned on soon after getting my first one (6-18 months), buying my second property. That would take the majority of the rest of my savings, putting me in a position where I then need to save another 20% down payment for a third property.

What's the best strategy for making the most of the $52,500 left after my second property? Is BRRRR the best move? I'm a little uncomfortable rehabbing and refinancing on only my second property, but I'll do it (as cautiously as possible) if it's clearly the best way.

Side note - I know Brandon has a book on investing with little or no money down, does it translate well into the Canadian market?

Thanks for all your advice!

Trevor Gaal · Answer

Hi Ryan,

Starting to think about your 2nd, 3rd,... 6th property is a chess game. You need to plan your next few moves. So first, you'll want to make sure you have your "3 C's" lined up: 1)  your Credit score, 2) your debt-to-income ratios (Capacity), and 3) your Collateral... you should be good for the third one as you have enough for your next down payment. You'll want to talk to a good investor-focused mortgage broker, not just any random broker. Tell them your goals and the strategy that you'd like to use, they'll help guide you and give you some education that you'll need at this point.

In terms of your capacity for another mortgage you'll want your broker to choose a lender that will count the maximum amount of rental income when determining your ratios. Scotia Bank has generally been the most favourable for this, but your broker will know which lender to approach based on your situation.

The next thing to consider is your investor profile and your skill set. Do you have much time to dedicate to managing your first property if you get a 2nd one? Do you like dealing with tenants and the issues that come up? Are you handy? Can you do small repairs yourself? Do you have the time to learn new skills and start doing some renovations if you do a BRRRR project or a conversion?

Personally I'd do a conversion and add a secondary suite to a house as close to the peninsula as you can afford. Either that or buy a beat-down triplex and fix up the apartment you're living in while renting the other two, then switch to the next unit and fix it up, and so on. The problem with multi-fam in HRM is, as you said, it's HIGHLY competitive because of the low low inventory. I've made 7 offers in the last 7 weeks (all my highest and best offer) and have been beat every time. There's a lot of folks willing to over-pay on speculation right now in Halifax! I'd look for a conversion project that's been on the market for more than 90 days. Those sellers are now willing to negotiate on price. There's either something that's just not appealing to a regular home-buyer, or they're priced too high. Either way, it can be a great opportunity for you because you're looking at it from a different angle than most home-owners.

I hope that helps somewhat. Feel free to reach out if you have questions or what to chat real estate in Halifax. Happy to help where I can.

Cheers,

Trevor :)

Darius Ogloza · Answer

I would encourage you to stay liquid for at least a year after you purchase your first property.  You never know what comes up in terms of repairs/costs in conncetion with property ownership as this is your first.  Tortoises eat rabbit for dinner.

Theresa Harris · Answer

Makes sense.  Some houses have the entire basement as a suite, so the footprint is the same as upstairs.  Get the first two houses and then worry about the third.  If you have a tenant renting part of your house, your living expenses will go down (well til you have kids!!).

Yuan He · Answer

Hey Ryan,

I think I was at very similar position last year. I just moved to Halifax last July and had some savings. With getting some help from @Trevor Gaal, I bought my first property as a house hack, spending some money settling down like buying a car and some furnitures. With the rest money left, I just closed on my second property with a partner. So in my opinion, you have tons of options regarding how you can use the rest of capital. I would recommend you find a partner and pool your money together to buy a larger building, but you could also just buy some very nice cashflowing rentals in some areas like Windsor which is very near HRM. Moreover, with 50k as down payment, you probably can get a property in some areas that do not even need reno. Of course, I'm assuming your primary goal is cashflow, not huge potential for appreciation. My second property is in the valley, not HRM, which means it's a bit distant and I should not expect rapid appreciation, but it's not that far and it yields handsome COC return.

Happy to chat more about it.

Yuan He

Ryan Kucey · Answer

Hey Trevor, good to meet another investor in HRM! Your advice is valuable. I'm working with a real estate agent who specializes in real estate investing and has connected me to a mortgage broker who also specializes in this. So I'm starting to build the right team.

My credit score is excellent, I've been borrowing and paying down credit and debt properly since I was 19. I've got a healthy salary of around $140-150K, although I'm not overly knowledgeable on how debt-to-income ratios affect mortgage lending. I read in Brandon's book that in the US, it's either 4 or 10 mortgages one individual can hold through conventional lending. Hoping to learn more about this as I continue researching and networking.

Thanks again!

Ryan Kucey · Answer

Thanks for your response! I'm not necessarily worried about funding the down payment on a second property, I'm more worried about having nothing left for a down payment on the third.

As far as living in the suite, I have thought about that but it doesn't really work with my partner and I's lifestyle. We're probably only a couple of years away from a kid and we both work remotely, so we need the extra space.

Anthony Dadlani · Answer

@Ryan Kucey

Fix and flip is the best way to build capital that you can use later for brrrr or long term.

Find yourself a capital partner so you can stretch your investment dollars.

Bluck

Eric James · Answer

Read up on the BRRR strategy to preserve your capital.

Theresa Harris · Answer

@Ryan Kucey  Know what you are comfortable with and stick with it.  Congrats on looking for your first house.  I think you are on the right track buying a place with a secondary suite and then using the rest for future purchases with 20% down.  Find out how much you can borrow in total, so you know if you can buy a second place right away (if the right place comes up) or have to wait a bit.

Have you thought about living in the suite and renting out the main floor instead?  If you can find a place with a walk out basement, it could be good and you'd make a lot more money.

I have $75K and I want to buy multiple properties – thoughts?

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