Home Owner Occupied First, then Rent out

[Myles MacMillan]

Hello All,

I'm a Canadian, living in Winnipeg who is just starting out into the REI world and looking to get into buy-and-hold single family homes. I'm excited to get started, however coming up with the 20% down payment is going to take some time. My realtor suggested that I buy a property now and move into it with 5% down (which we can do in Canada), live in it for a year then rent it out and buy another for 5% down. I'm not sure if this is good advice for a couple reasons. The first of which is that I want to do everything "above board" and when we bought our current home a few years ago (for 5% down), I remember there being a clause in the mortgage paperwork that said the home had to be "home-owner occupied". Is anyone here savvy with bank-financing contracts? I would like to know what the implications of following my realtors suggestion would be in the eyes of the bank? I doubt I would have 20% equity into the property after 1 year which is what you normally need to get a rental property mortgage here in Canada. I also like the idea of having at least 20% equity in a property incase something happens in the market or personally and I need to sell the home. I would like to know that when I sold, the sale price would most likely cover the loan which may not be the case with a 95% LTV mortgage.

Any advice would be greatly appreciated!