All Forum Posts by: Scott Galloway

Leveraging to 95% is unwise. Don’t become a motivated seller.

@Scott Galloway

Opex- operating expenses

Capex- capital expenditures

Wrt avoiding 20% down statement:

You’ll find a LOT of talk of people routinely turning primary residence into a rental. It’s a great strategy and one many folks use to get into landlording. Completely legal. However, you’ve gotta be able to prove your intention when the CRA calls. So the folks who buy a primary with 5% down, then “live in it for a year”, then buy another and then that into a rental and keep doing this over and over... CRA likely wouldn’t be a big fan of that and you could face some penalties. Anyone who ever drops the “just live in it for a year!” statement on you is ill informed or has been mislead by one of the many guru’s who make their $ on teaching, not doing. There never has, and likely never will be, a definitive number of days stated by the CRA in which you must occupy a home for it to prove primary residence. It’s all about proving intentions. So if you’re thinking of buying with 5% down, living in it for a year, then turning it into a rental... you may want to be careful with what you say and post online as far as timelines go. Nothing wrong with analyzing if your primary residence would cashflow. Just make sure it’s more of a “what if” type approach.

@Scott Galloway

No particular additional risks up here, and you’re in a phenomenal city with respect to the real estate cycle too. Pretty rad city overall actually, I miss it. Pay attention to expected cashflow using realistic rents after you move. Lots of folks look at this as a way to skirt the 20% down rule, I look at that as unwise. Make sure you’ll be 5 year cashflow positive on the way out. Meaning, include all expected capex and opex.

 Go to your bank and talk to a loan officer.  They can tell you how much you are pre-approved for and then you can find out what the payments will look like.  It is a good idea to get the longer term for your mortgage (25 years) and then you can increase the payments if you want to pay it down faster.

As long as you have the cash flow for all of that and for any unforeseen repairs and/or vacancy - then you should be good.

The most the interest rates would rise in a year would be about 1% and it is usually much less... I'm on fixed mortgages myself but even if on variable, if things get too risky you can always convert into a fixed mortgage later. As Luc said, the rates won't rise too aggressively as it would cause a housing collapse like the US. Even the 2% stress test implemented was to help prevent the risk of a collapse.

Does Canada have massive mortgage rate fluctuations well beyond what's possible in the US? Because in the US is is extremely unlikely that rates could change that much any time soon.