All Forum Posts by: Brianne H.

@Steven Lalonde is the triplex also located in Castlegar? I would be quite wary, and probably only buy it if it was a really good price. Winter in Canada - most people really want to have a vehicle to get around in, even if it is an old junker, rather than rely on public transit (unless it's a large city with good transit, like Montreal). Also, being winter in Canada, people usually want the option to be able to plug in their car. There's always a few that don't and chance it starting when the weather gets cold, but I distinctly remember my first rental place when I was 18 not having a place to plug in my old car - never again would I want to repeat that winter. Any place I bought or rented since then I made sure there was a place to plug in. 

Unfortunately there's just not a great solution. If you buy it, tenants won't be thrilled to have to park so far down the street (and in the winter, not on a priority snowplow route, there's going to be a lot of snow on the street, making it harder to get in and out) and not have a plug in. Will they have to fight for space down the street or is there ample space farther down? Residents who live farther down the street may not be thrilled at having to compete for parking space. A lot a tenants will be turned off when the parking is that inconvenient, they'll probably gripe to you about it even though they know that's the situation... It will probably be the bane of your existence with this property but if you can get a good enough price on it to make it worth it and account for the number of potential tenants who won't want it due to the parking, it could be worth it. 

@Gaurav Dhir one other thing I forgot to mention is to read up on the landlord-tenant acts for each province you're considering. They vary quite a bit. I *think* (could be very wrong) the only 2 provinces you can refuse to allow pets is AB and BC, all others must allow. No idea about NB, but AB tends to be quite fair to both landlord and tenant. The rules are quite manageable. BC on the other hand, I would NEVER invest in for buy and holds. They are extremely left-wing, pro-tenant, and have just changed the rules to become even MORE pro-tenant. With the new rules, if your tenant isn't technically breaking the lease but you'd like to non-renew to give them notice for whatever reason, you CAN'T. Not even month-to-month will help you get them out if they aren't violating the lease. There are cases going to court where a landlord wants to do a full-scale renovation, so all tenants are being given notice so construction can be completed (a "renoviction"), and it's looking very likely that the tenants will win and be able to move back into the units after renos and will not pay any increase in rent (umm, what?!) Which, big picture, actually hurts tenants because what landlord will do any renos if they can't even recoup their costs in increased rent? But I digress... 

I can't speak to Saint John, but I can chime in for Calgary. 

+ lots of people, businesses, and houses, so your rental and stock pool is not limited

+ The general feeling is that we've just turned the corner and probably the worst of the recession is over. Probably over the next 5 years or so we will see healthy market appreciation. 

Now for the negatives:

- Though the feeling is we've rounded the corner, there are still A LOT of people out of work. Businesses and anyone in the oil industry is being quite cautious about rehiring people. There are still layoffs happening (ex: SAIT, though it's a post secondary school, the economy affects everything.) 

- Although house prices have dipped a fair bit over the last 3 years, they are still quite high and for an investment property, you will need 20% down for a conventional mortgage. Unless you plan to house hack and live in one unit? In which case you'll need minimum 5% and will pay a CMHC or Genworth insurance premium which can be as high as 4% of purchase price. 

- Along with house prices, rental prices have dropped as well and haven't bounced back to where they were about 4 years ago. 

- You're unlikely to find a single family home that you could get to cashflow unless it's an absolutely incredible deal. Even duplexes, 3- and 4-units are tough as the prices are quite high. A quick look on MLS shows me that the lowest priced 2+ unit property is $569,000.

If you're intent on Calgary, probably the best thing to look for would be a suited SFR that has a main floor and basement suite (bonus for a garage too). If you can find one that was built before 1972 and has had the basement suite since before then, it could fall under grandfathered rules, which as long as it has windows of proper egress size, interconnected hardwired smoke alarms, and a private entrance, doesn't require much else in the way of upgrades or zoning. But even then, you may not have great cashflow, if you can get it to cashflow at all.

For example, I had a house in Marlborough NE that we bought for $333,000. It needed $26,000 of renovations, and at the time we owned it (2015/2016, had we not sold it) we rented the basement suite for $750/m, including utilities. We lived upstairs, but I ran the numbers on if we were to keep it as a rental. Let's say we drop the basement rent to $700/m and get them to share the cost of utilities with upstairs, and we could rent the upstairs for probably $1200. It also had a double detached garage. Let's say $200/m for that. All together, cash flow would be $2100/m.

Let's also say we had 20% equity in the property, $359,000 total costs, and 20% = $71,800, plus closing costs. If we had a 5 year fixed mortgage at the going rate of around 3.5%, the mortgage would be $1434/m. The tax rate on $359k is $2334, or $195/m. House insurance is probably going to be at least $125/m. 

Mortgage = $1434

Taxes = $195

Insurance = $125

Vacancy (let's go low and say 5%) = $105

Cap Ex (let's also say 5%) = $105

Subtotal = $136/m cashflow. That's also not including management, snow/landscaping costs, or any other unexpected costs. 

Are you married to the idea of these 2 cities? I hear Edmonton is doing really well right now for everything from flips to buy and hold. It has similar rents to Calgary, but much lower cost of entry. In Calgary from what I've heard from others, the strategy that makes sense is rent-to-own, and everything else is doing rather poorly. 

I would also say sell. However you mentioned 2 of the rooms don't have closets, so it's technically a 3/2. If you could add closets in the other 2 rooms for a nominal cost, could it then be listed as a 5/2 and could you get more for it?

The mistake that stands out most clearly was buying our first live-in flip (first property ever) and not understanding all the little intricacies on mortgages. We went with what some average joe broker suggested, a 5 year fixed at 3.09%. Then interest rates went down about 0.75%. Then when we sold we had to pay an interest rate differential penalty = $7200. And know that I know more and look back on it, I'm dang lucky it wasn't more. Some penalties that I've heard about have been $12k, $18k, and $32k. Always go variable with a simple 3 month interest penalty if you plan to get rid of the property. 

I can't really add to this conversation, but I did have a question while reading this. Do you (the general American you) not have a condition date at which time the buyer must waive all their conditions (financing, home inspection, etc), and after that the deposit becomes non-refundable? In Canada, the buyer has typically a week or so during the condition period to finalize the mortgage and get full approval and sign the mortgage commitment. Once that's done, the financing condition (and all other conditions) are waived, and should there be any issue with the mortgage or funds not coming through, too bad buyer, your deposit is gone (and rightfully so). It seems like that's not how it works in the US? 

@Roman Stefaniw I think what your credit union person is talking about is a mortgage + improvements. We are actually trying to get one right now, and yes once the rehab is complete and they have someone come out to verify the work was done they will give you additional money for the improvements. I don't know how that might differ if you're looking for a non-owner occupied property, like a BRRR. I can't see it making a ton of sense if you were just doing a flip, but if it was a BRRR and they're okay with doing it on a non-primary residence, that might be the best way to go.

For our first 3 properties, it was through Scotia, but they were all technically primary residences as they were live-in flips for us. The first was the 5 yr fixed at 3.09% that we got dinged the $7200 on. The second mortgage was also through Scotia (they said they would reimburse us 20% of the $7200 penalty if we went with them again) but this time on a 5 yr variable. By that time my rate was 2.1%. When we sold #2, we had to pay the penalty  (about $1600 or so) but we managed to be able to do an almost perfect port with a $4k top up amount on a second mortgage through Scotia, so we got that ~$1600 back. Then when we sold #3 it was still the same variable mortgage so we just paid out the penalty and were done with it. We've not had a mortgage for the last few months as we are in a temporary rental until our primary house is finished, which should be in about 2 weeks. 

If you're looking for cheap money for rehabs, I would suggest getting lines of credit. My rates are between 4.5% - 8% at the moment, and most are interest-only payments while I have a balance, and I can use it as I please. Now, if you're looking to get an unsecured LOC, here's the way to do it (from personal experience):

You make appointments at as many banks and credit unions as is feasible, all in the same week. Then at each appointment you show up with pay stubs, a letter of employment, and if necessary maybe your last tax return page (if you have self employed income). You do the credit application for as much unsecured LOC as you can, and you say it's for home improvements (which it is. But they love to hear home improvements because it's the biggest checkmark on their list of "What will the client use the money for?" paperwork. Apparently don't say that it's for some costs related to developing a property because one guy at RBC said that technically you must only use a draw mortgage for property development and you're not allowed to use an unsecured LOC and he actually turned me away. What?!) They will run your credit and hopefully you will be approved for as much as they are willing to lend you. At Scotia, the lady told me that if you ask for $25k or under and have decent credit and income, you're just about automatically approved. Any more than that and it's a little more of an in-depth application.

Now the reason you do this all in one week is because when they all check your credit, you'll have multiple hits on your credit report, but to the credit bureau, they'll see it as you rate-shopping, and they will only ding you as if you've had your credit checked once or twice, not 4+ times or whatever it is. Also if bank #1 approves you, your credit report won't have updated yet by the time you get to bank #4, so it won't muck up your DTI ratios at ban #4.

I have done this and between my husband and I, we had an existing $15k and $17k LOCs, and together we upped our combined LOCs to $117k, at TD, RBC, Scotia, and ATB. This was all in June 2016. We then ended up not using any for a year, but this past summer we bought 7 acres and put a house on it, and we did it all with a land loan from ATB and unsecured LOCs. However we needed more cash so we approached the banks and asked for an increase. RBC declined, we didn't go to ATB as they were the highest interest rate and we haven't used that LOC yet, but TD and Scotia agreed to bump it. Scotia also gave me a pre-approval for a low interest credit card which I am using too. For all of our LOCs, we now have $178k in unsecured available credit. Add in our credit card limits, and we have $231k. Astounding if you think about it and if play your cards right.

@Roman Stefaniw The new rules taking effect are for those with 20% down or more having to pass a "stress test", which is not only qualifying for the mortgage at the actual interest rate, but needing to qualify for it at the posted rate (which for a 5 yr fixed is I think 4.99% right now). Last year the same stress test was applied for borrowers with less than 20% down, so really they've just extended it - HOWEVER, in theory that only applies to federally regulated banks, which if you go through a provincially regulated credit union, in theory they are not obligated to follow the rule. Whether they do or not is up to them. 

Word of advice though if you're looking at taking a mortgage you see yourself paying out or refinancing - go with a variable mortgage, as the payout penalty is usually only 3 months of interest. On our first flip I didn't know that and had a 5 year fixed, and got hit with an interest rate differential penalty - $7200! I'm currently getting a mortgage on a different property, and if I went through Scotia with their 5 year fixed, if I paid it out in the next 4 years, the penalty varies between $11,800 - $12,750. So be very clear on your prepayment penalty fees before you sign your life away. They can still do ports but with restrictions, and then they'll give you a blended rate, and the 2 mortgage components don't ever come due at the same time, and it's messy. Generally do not recommend, though I did it on one property and the lender gave me back my prepayment fee in full from the property it was ported from. 

If you're doing a BRRR, as far as I'm aware you can get up to 80% LTV. I am currently doing a refinance and they have told me as long as I have 20% equity in it, I can take out as much as I want.

CMHC/Genworth need to be owner occupied and they do charge quite a bit for the premium (I think about 4% but I could be mistaken, haven't had to use it in a while). So it can easily add $10k+ to your numbers, but if the alternative is being able to get into real estate or not, then it could very well be worth it for you. 

Hi, I'm from Calgary. Hello fellow Albertan!

Goodness no. Biggerpockets - free for basic membership. Library books - free. Attending local REI groups in your area - nominal costs compared to $27k, and you'll meet people who are actually in your area and know your local market better than the mentor this course would send you.

If after all of these things, you're still really struggling and looking for guidance, I would suggest finding a local mentor you can learn from. When I was figuring out my way through my first flip, I thought, "I need a mentor, someone who actually knows this city and how things differ in Canada vs the US." I got on google, and that's how I ended up finding my mentor who has various coaching programs. I ended up spending $3k for 10 private meetings, he helped me through another flip with as much or as little hand-holding as I wanted, he shared his network with me, he will always make the time to look over any deals, and even now that I've finished the 10 sessions, he's still encouraging me to find leads, and we recently just did a deal together. To me, THAT was money well spent and I'm still getting the benefit of his knowledge and experience.