What would you do in my shoes?!

Question

Hello BP community!

2nd post (yay). Have been browsing content on here and loving the community camaraderie so far.Wanted to share my situation and see what you guys think.

I have 2 properties: 1) primary residence; 2) rental property (former primary residence). Both properties are situated in the Greater Vancouver Area (Canada).

The market in Vancouver has been on fire, as a result, I have decent equity in both properties (over 50% on both). I want to sell my primary residence for climate reasons (no need for debate on this pt pls) as it sits in a low-lying area. My predicament is that I just became self-employed and don't have 2 yrs of income for a traditional mtg. Therefore, my options are:

a) sell my primary and move back to my rental

b) sell my primary and rent

c) sell my primary and rental and buy another home cash (not optimal)

c) don't sell and hold until I have enough provable income for a conventional mtg.

Hold on there's another kicker. My rental property is a decently sized lot that could be re-developed with a new home or potentially sub-divided (if I can convince the city to amend the "official community plan".

I'm leaning towards option "a)" as that would be the most beneficial for capital gains purposes, but sub-optimal for living standards (older house, needs updating).

On-top of all this, I would like the leverage the equity in the homes to invest in some properties in the US.

Looking forward to hearing your thoughts!

Brett Centerbar · Answer

Have you looked at doing a cash flow/DSCR loan? I am self-employed as well and just used one of these loans to purchase a rental. They generally require good credit and 20% down but do NOT require a w-2.

Ryan Tam · Answer

unfortunately, my current income is not the same as my past income yet due to menagerie of reasons so this might not be feasible at the moment.

Ryan Tam · Answer

Noted - due dilli is underway. Just reached out to an architect to do a feasibility study on the rental proper for potential development or subdivision. Unfortunately, prices in Canada are prohibitive in my area. I would at least have to invest in one province over which would require significant travel, putting it on the same effort level as the US. I'm also planning to work with a PE fund on an LP level to complete the first couple of deals. Which I feel mitigates the OOS risk.

Ben Lin · Answer

It's difficult to comment without knowing the numbers involved. I think youre pretty set about selling your primary. As where to move, well it depends, if you want to save some money for your new business then rent somewhere cheaper than what youre getting from your rental. It's also less of a hassle as you know evicting your tenants is not as easy as it seems.

As for the kicker, yes you can move back in to your rental and build another SFR and rent it out. But do you have the money and most importantly time to build a new house? If you do, why not?

Investing your equity gain in the US is a good idea if you know where in the US to invest it. Good luck to you.

Joshua Janus · Answer

I would speak to a local small credit union or bank. They will be more flexible when it comes to purchasing your own primary residence versus an investment property if you go that route. I am attempting to use a DSCR loan now on an 8-10 unit and my credit score and the performance of the property are the main factors when it comes to qualifying.

Theresa Harris · Answer

Talk to your bank about buying a new property and moving your mortgage.  If you keep it for the same amount, they know your payment history.  Depending how long you've had it, the mortgage rules have changed in the last 5 years, but with 50% equity and a rental that shouldn't be a problem as long as your current income is comparable or higher than your old job.

George Azita · Answer

The only way to be sure is to spend a significant amount of time and create a spreadsheet with calculations for every possible calculation and cover every option.

You claimed you have the option to keep both properties and wait until you have a better W-2 situation. So, you are not hard-pressed to sell. Without a spreadsheet, nobody can nor should give you any advice and the very last thing I would ever do is sell a property without having a seriously good reason to e.g. if I could make a significantly better profit.

As for investing in the U.S. if you remain in Canada, I am not an advocate for owning properties when I am not hands-on and cannot have 100% control of every facet because long-distance properties have many inherent risks and have many additional expenses and inefficiencies that can bankrupt you. If the real estate is not-so-bad in Canada you should stick in your own back yard (as they say).

Post your numbers and lets see what your options look like.

Ryan Tam · Answer

No not yet. Just getting accustomed to all the financing vehicles in the states. Will definitely look into it as it sounds like a good solution for my situation. I assume its open to foreign nationals as well?

What would you do in my shoes?!

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