All Forum Posts by: Cindy H.

Hi Clayton...wow! thank you for the detailed answers and you've definitely helped in putting it all in perspective.  For capital gains in Canada, basically we pay no capital gains on our principal residence....and then if the use of that home changes (i.e. converting to a rental), the capital gains is calculated from the value at the time of change in use, to the value when the house is sold.  While my house was valued last year at 365,000...prices in our market have dropped 5 to 10 percent since then....so the appreciation is not as great as it seems (plus the interest I paid on the mortgage). 

Hopefully this isn't an oversimplification, not withstanding the caveats you mentioned, but because my current house was already paid for by me (only a few years of renters helping to pay the mortgage), it would make more sense to purchase a new property as an investment, where the tenants are essentially paying for the equity in the home....

I see what you mean now for CoC not being the best metric...do you know where i can find a spreadsheet (a starting point) that I can adapt for my market to help me with the analysis. I played around with the Bigger Pockets one...and it does consider rental increases / property appreciation....will it analyze the equity build up by tenants paying the mortgage?

@Clayton Mobley how do I analyze a property that I currently live in where I would rent out the basement? Do I simply pro-rate the costs / expenses?

and I should have added above...that my current property area won't appreciate as much as the new area that I'm moving into :)

@Clayton Mobley Thank you for replying!! My current home was purchased in 2002 for 170,000 and was evaluated last year at 365,000. I was very naive when I arranged my financing (started with 35 yr amortization) but switched over to a HELOC in year 7 and paid it off by 2013) I wish I had tracked the amount of interest I paid! I had rented it out for a few years (2014 - 2017) for $1800 per month. I think I need to put about $30,000 repairs / reno's. I would manage it myself (having hired a property manager previously and found that I was always having to stay on top of them). Taxes are $200/month and insurance would be approx $1000 per year.

If I do the analysis as per Brendan's method...I have $1800 income, $700 expenses (I've estimated a fairly high capex as there are some major repairs that I will have to do in next 5 to 10 years), cashflow is $1100. One question, when I'm calculating CoCROI, do I not consider the original purchase price etc (downpayment) or do I simply include the current required investment ($30,000 repairs / reno's).  This would give 44% CoCROI.

The new property has a 2 bedroom basement suite and would also need about $10,000 worth of work to get it to the point where I can rent it out (mainly the entrance separation).  I can probably get $800 - $900 per month to rent that out. The new property requires $260,000 of financing at variable (currently 4.45) rate.  Some of the interest from that can be deducted from the rental income as per Canadian tax laws.  Thank you for helping out...

I'm in Calgary, Canada. I currently own my own home (no outstanding debt) - typical single family starter close to schools, etc. I'm purchasing a new home that has a basement suite (although a bit of work needed if I want to register it (doesn't have separate entrances off of common stair entrance) where we would live upstairs.  I'm debating whether to 

1) sell my current home, use the proceeds towards the new home, thus minimizing the interest on the new home HELOC, then keep looking for another investment property (maybe attached up / down or detached with main / basement suite) closer to my new property (less rental income until a second property found)

or

2) keep my current home, and rent it out....and when I have enough equity again, look for another investment property...

For both options, I would need to complete some upgrades to my existing home (minor repairs, bathroom reno at a minimum)

I'm familiar with doing the analysis on purchasing a property for revenue (the four boxes) and also the 1 percent rule (almost impossible to find in my city but with effort, possible) but I'm not quite sure how to analyze the above.

Any suggestions? similar experiences?

Thank you!

I have an existing HELOC on my house (in Calgary) and wanted to buy a second property using part of my first HELOC as the down payment and then opening a separate HELOC on the new property. I chatted with my bank and they said no problem. Some things to keep in mind though 1) even if you have paid off your first HELOC, their risk assessment will assume you are carrying the full amount as debt when assessing your ability to carry the second HELOC (after all, you can spend up to the full amount at any time) 2) if I wanted to have less than a 35% down payment the bank wanted me to have a combination of mortgage and HELOC, 3) it's more important to have a full time continuous job than it is to have assets that could pay for your house....I work intermittent contracts...they didn't like that at all. Luckily, my husband has a full time job so even though they didn't like my situation, his situation stabilized it somewhat (first house is in my name, second house will be in both of our names). Just describe what you want to do to a few lenders and see what they have to say, be wary if they tell you that you can afford a property of "X" amount that seems high. Thankfully we decided to stay well within the first amount they told us because at the end of the day, the amount they approved us for was much less (and far more reasonable). Hope this helps!