My first deal in Sudbury, ON

[Ashley Cann]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Sudbury.

Purchase price: $205,000
Cash invested: $15,000

Bought a 3 bedroom single family home to owner occupy. Built a two bedroom apartment in the basement and rented it out. Moved out of the upper unit and have been renting both units out for 2 years now. We used a mortgage plus improvements loan that provided us with $40,000 towards the renovation, and used a line of credit for the remaining $30,000, for a total of $70,000. We used the rent while living there to pay down the line of credit. We are about to get a HELOC through a local credit union that will allow us to access up to 80% of the equity. The current appraised value is $300,000 and we owe $200,000 left on the mortgage, so we should be able to get a HELOC for $40,000 to use as a down payment on our next property.

What made you interested in investing in this type of deal?

My fiance (now husband) and I wanted to house hack. We were looking for something that we could live in, and build or do a fairly significant renovation on to increase the equity. I'm not exactly sure where our interest came from - probably from watching too much HGTV and the show Income Property.

How did you find this deal and how did you negotiate it?

We found the deal through our real estate agent. We didn't really negotiate at all. There had been a deal that had just fallen through for the buyers and we put in the same offer and got it accepted.

How did you finance this deal?

We used the Home Buyer's Plan from my fiance's RRSP for the 5% down payment on the home. We got a mortgage plus improvements mortgage that added $40,000 to the mortgage to provide us money for the renovation. We used a line of credit and 0% interest balance transfer deals for the remaining $30,000 and paid them off with the rent until we moved out.

How did you add value to the deal?

We added value to the property by creating a two bedroom apartment.

What was the outcome?

We purchased at $205,000 and it is currently appraised for $300,000.

Lessons learned? Challenges?

1) "Minor water seepage" in the spring can mean a quarter of the basement floods in the rainy fall and new weeping tile and water proofing is required.
2) Jack hammering concrete to put in plumbing is a really hard job - look for places with rough ins already or plan shorter plumbing runs.
3) Remember to centre the lights on the ceiling around bulk heads not the centre of the room, because having a light right beside a bulk head looks really weird and blocks some light.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We used TJ Herault as a realtor, from the Kuula Group. For a mortgage broker we used Joel Glaude from The Mortgage Centre - he got us a good rate and was quick to answer questions and knowledgeable.