Adviser worried because I’m using savings for down

[Paolo Umali]

22 yo investor in Fort McMurray Alberta going through the financing condition on a property with a mortgage adviser.

Started my career two years ago and saved up ever since for a 20% down on a property. Finally got enough for a property and now the adviser is telling me to be careful with due to her experience of people losing their equity from the market. (Believes the market is going to collapse)

I ran the numbers multiple times and though I understand I can’t think of every single scenario, I am confident that it is a smart investment. After the adviser informed me about the market, I had to step back and reassess and understand the risks I am taking.

I have read multiple posts about the possibilities of market collapsing however and came to the conclusion that if I maintain my job, and hold the property long term(15-20 years). I should be better suited to get through the housing market dip.

Info about investment.

555,000 sale price

Paying 20% down.

Around 1700 for mortgage. Additional of 800 for utilities, and property tax.

2500 monthly payments altogether.

(I’m able to get low interest rates)

It’s a legal basement and they’re paying 1400. I’ll be living on the main floor with my brother. He’ll be paying 500 monthly.

2500 monthly payment - 1900 monthly income = i pay 600 a month.

After five years I’ll be leaving the property and renting out the top to cover for everything plus cash flow while I get another property.

So as stated above, I should be okay if I’m able to keep the tenant, I keep my job as I hold the property long term. I’m not too worried about the equity as the market bounces in the long term outlook.

If there is anything I should watch out for, please do not hesitate to let me know. I am a very new investor and I feel like Dorothy after the tornado in wizard of oz.

[Alecia Loveless]

@Paolo Umali I, too, would take the deal.

One of the things I look at when purchasing a property is if I believe the rental market will stay fairly stabilized even if the the housing market collapses some. So, since you know your market, do you believe if the value of the home you’re buying fell from $550,000 to $475,000 could you still get $1400 for the basement and $1600-$1800 for the top part once you move out? That way your bills will still remain covered while the housing market recovers which it will eventually.

If the answer is yes, you can still generate $3,000-$3200 a month in rent because you have a good, desirable location then you should be fine to make the purchase.

If you think the whole economic basis of your town falls out if the housing market drops, like you live in an oil field town dependent on an oil boom it might not be a good opportunity.