Can you buy multiple properties at 5% down in Canada?
New to Real Estate · Member since 2020 · 38 posts · 13 votes
I'm a big listener of the BP podcasts and have read most of the books they've recommended there but they're largely American and often talk about American real estate strategies. As both a new investor and a Canadian one, it's hard to tell what relates and what doesn't.
One particular question I have relates to a common strategy that is mentioned a lot on BP. Can I buy a property at 5% down, live in it for a year, then buy and move into another one at 5% down, turn my last primary into a investment property and continue to repeat this process?
I ask because I've been told by a few friends that you only get 5% on your first property then every other property is 20%. These friends are older then I but also have no REI experience so I'm not sure whether I can trust their knowledge on the subject.
As a side question. I'm running out of books to read and would love suggestions on specifically Canadian real estate ones as I feel I'm reading to many American ones.
Hey @Elijah Williamson - You can put 5% down on multiple properties in Canada. The criteria is that is must be a purchase under 1M & be your primary residence.
The situation you described is do able. Buy a home, live in it a year or so, move, and keep it as a rental, buy again for 5% down.
Feel free to DM to chat further.
Hey @Elijah Williamson - You can put 5% down on multiple properties in Canada. The criteria is that is must be a purchase under 1M & be your primary residence.
The situation you described is do able. Buy a home, live in it a year or so, move, and keep it as a rental, buy again for 5% down.
Feel free to DM to chat further.
Jacob has the right advice for you! Good luck!
@Elijah Williamson, the topic of Canadian REI books comes up often.... here are some threads (search 'canadian books')
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...
My top 3 (in no particular order):
-Commercial Real Estate Investing in Canada (Boiron and Boiron)
-Making Money in Real Estate (Gray)
-Legal, Tax, & Accounting Strategies for the Canadian Real Estate Investor (Cohen and Dube)
@Elijah Williamson
Your chances of long term cashflow on a property leveraged to 97% are very slim. Once you add on Cmhc you’re starting day one nearly 100% leveraged. This is a bad idea.
Yea, roi goes up with leverage. Yes it is more risky. Do not get married to the idea of appreciation being assured. It isn’t. In about 24 -36 months those jumping on the eastern Canada bandwagon are going to find this out.
Jacob has the best answer there. It is totally doable. But if you do it 1 month after another, you may have a problem. With 5% down payment it has to go to an insurer, there are 3 of them in Canada. CMHC, Canada Guaranty and Sagen. You can have a property with all 3. You really need to work with a mortgage broker, to make sure the lender works with each insurer.
Also to cash flow at 5% down payment, it is totally doable, but I'd say to really make it work it has to be a duplex (with triplex and fourplex, you need 10% down), and that duplex has to be owner occupied. So essentially it could "cash flow" but to move in, it just reduces your housing costs.
Jacob has the best answer there. It is totally doable. But if you do it 1 month after another, you may have a problem. With 5% down payment it has to go to an insurer, there are 3 of them in Canada. CMHC, Canada Guaranty and Sagen. You can have a property with all 3. You really need to work with a mortgage broker, to make sure the lender works with each insurer.
Also to cash flow at 5% down payment, it is totally doable, but I'd say to really make it work it has to be a duplex (with triplex and fourplex, you need 10% down), and that duplex has to be owner occupied. So essentially it could "cash flow" but to move in, it just reduces your housing costs.
This technically could be considered mortgage fraud.
@Chad U.
By moving into an owner occupied house, then changing your mind and moving to another house?
That is not mortgage fraud.
@Chad U.
By moving into an owner occupied house, then changing your mind and moving to another house?
That is not mortgage fraud.
If you do it repeatedly with the intent of renting the property out, yes it is.
@Chad U.
You must have different rules in Florida. This is the Canadian real estate forum, this is not mortgage fraud. If you move into a house, you agree it is owner occupied.
Things change in people’s life, and it is possible to do move into another house, which is the original question. With all underwriters and insurers looking at the file. If they think you’re doing this intentionally, and think you are being not truthful, or being fraudulent, they will find out.
In Canada we have much stricter lending them you do in the states.
@Chad U.
You must have different rules in Florida. This is the Canadian real estate forum, this is not mortgage fraud. If you move into a house, you agree it is owner occupied.
Things change in people’s life, and it is possible to do move into another house, which is the original question. With all underwriters and insurers looking at the file. If they think you’re doing this intentionally, and think you are being not truthful, or being fraudulent, they will find out.
In Canada we have much stricter lending them you do in the states.
I'm Canadian, and said if you try this repeatedly with the intention of holding as a rental. This is what you insinuated in your previous post which I was concurring with. I've seen people get burnt by trying this.
@Elijah Williamson In my practice as a mortgage broker (Canada), many prospective clients have asked the same question. In theory the strategy @Jacob Perez proposes could work/ has worked, but I caution you that the lender & insurer may decline if the timing is suspicious as per @Tyler Stiller
Your story has to make sense. Work with a mortgage broker who can create a game plan for you.
@Tyler Stiller is right it works I know several people that have done this especially if both spouses are on a mortgage “you have trouble” one buys one in there name one year another in there name the next.. call it what you wish it’s a loophole that not exploited a lot for using 5% down.. you just have to remember with the debt to income ratio changes it get way harder to get more as your mortgage payments are wayyy higher and using 5% down typically you have to go thru traditional methods but the point is @Tyler Stiller isn’t wrong
Hey @Elijah Williamson - You can put 5% down on multiple properties in Canada. The criteria is that is must be a purchase under 1M & be your primary residence.
The situation you described is do able. Buy a home, live in it a year or so, move, and keep it as a rental, buy again for 5% down.
Feel free to DM to chat further.
I bought my first in 2018(5% down) and is currently a rental, In Alberta, Canada.
Second in Nov 2022 with 5% down current primary residence.
I am looking to move and looking for something in Ontario, Do you think I can buy with 5% down for primary residence again after Nov 2023?
I think it's a fine line people are trying to thread here. You can climb the property ladder by buying primary at 5% down and then moving on and upgrade to another property later on. I think it's a timing and intent thing.
I know a lot of people climb the property ladder buying primary with 5% down on a condo and later upgrading to a house at 5% down. I think the one thing I will caution people is that when you refinance at the end of your mortgage term, you would have to tell the bank or lender that the property is no longer a primary residence. IF on renewal you do not let them know the property is no longer your primary residence, this could be considered mortgage fraud.
Oh one other thing to add, CMHC (and other insurers) can deny your insurance if they see you already have insurance with them for primary residence. So you might be force to do 20% down in order to get financing.
I think it's a fine line people are trying to thread here. You can climb the property ladder by buying primary at 5% down and then moving on and upgrade to another property later on. I think it's a timing and intent thing.
I know a lot of people climb the property ladder buying primary with 5% down on a condo and later upgrading to a house at 5% down. I think the one thing I will caution people is that when you refinance at the end of your mortgage term, you would have to tell the bank or lender that the property is no longer a primary residence. IF on renewal you do not let them know the property is no longer your primary residence, this could be considered mortgage fraud.
Oh one other thing to add, CMHC (and other insurers) can deny your insurance if they see you already have insurance with them for primary residence. So you might be force to do 20% down in order to get financing.
I think it's a fine line people are trying to thread here. You can climb the property ladder by buying primary at 5% down and then moving on and upgrade to another property later on. I think it's a timing and intent thing.
I know a lot of people climb the property ladder buying primary with 5% down on a condo and later upgrading to a house at 5% down. I think the one thing I will caution people is that when you refinance at the end of your mortgage term, you would have to tell the bank or lender that the property is no longer a primary residence. IF on renewal you do not let them know the property is no longer your primary residence, this could be considered mortgage fraud.
Oh one other thing to add, CMHC (and other insurers) can deny your insurance if they see you already have insurance with them for primary residence. So you might be force to do 20% down in order to get financing.
The 20% down is the 'safest' route where no one can question it. If the banks are aware and CMHC signs off you are probably good to go. It's really the insurance piece you want to be cognizant of, because you hit a 20% down payment amount then insurance is not involved so it becomes a question between you and the lender. It will be the lender's underwriting team making a decision and as long as you are truthful about what you are looking to do then you should have no problem. Circumstances change so you are not locked into one thing or another in the future, but your initial intent is important.
I'm a big listener of the BP podcasts and have read most of the books they've recommended there but they're largely American and often talk about American real estate strategies. As both a new investor and a Canadian one, it's hard to tell what relates and what doesn't.
One particular question I have relates to a common strategy that is mentioned a lot on BP. Can I buy a property at 5% down, live in it for a year, then buy and move into another one at 5% down, turn my last primary into a investment property and continue to repeat this process?
I ask because I've been told by a few friends that you only get 5% on your first property then every other property is 20%. These friends are older then I but also have no REI experience so I'm not sure whether I can trust their knowledge on the subject.
As a side question. I'm running out of books to read and would love suggestions on specifically Canadian real estate ones as I feel I'm reading to many American ones.
I have heard good things about Don R Campbell's books on REI for Canadians. Your local library should have some titles of his.