Investing in Real Estate

Why Invest in Calgary Real Estate?

Real estate investing is becoming more popular. Maybe you have been to a REIN quick start program and you’re excited to begin. An increasing number of regular homeowners are purchasing second homes to flip or as a rental property to hold. But what is the “hype ”, so to speak?
There are many millionaires in Canada. It is proven that about 75% of them, have acheived that success via Investing in Real Estate.

If you want to be truly successful there are several step that you absolutely must follow. These steps are usually very easily accessible via Real Estate Investing Networks, groups, clubs, and websites.

Investing in Real Estate in 2009 Extreme Lending Challenges:
What are the options for Investors?

Investing in real estate is not as easy any more. If you’re looking for some creative financing options, don’t look towards Canadian Banks and Mortgage Companies.
I have recently been unable to do a refinance on a rental property for an investor, where the loan to value was 37%, and the investors credit score was over 700. Why, you ask? Because this investor has multiple properties, and our ability to get an approval was impossible because lenders require brokers to use 100% of the liability, and only 50% of the income. So even if you have thousands of positive cash flow per month, the lenders won’t structure your application that way.

Results:
The results of this are that many real estate investors will need to look to private financing at much higher mortgage rates and less desirable terms. Lenders consider rental property mortgages to be the highest risk type of product. There has even been rumors in our industry that Genworth and CMHC will soon be discontinuing their high ratio rental programs.

Revert back 6-7 years ago
About 6 years ago GMAC Residential Funding Corp, bought Mortgage Intelligence. With this purchase, they offered exclusive products to their brokers. This was a first in Canada, investors could buy or refinance rental property with as little as 15% down. I had a large portfolio of Investors that benefited from these products. Since the economic crisis, GMAC has left the country, and all other Alt A lending products have been discontinued for rentals.

Bottom Line
Make sure you have at least 20% for a down payment, and verifiable income and strong credit. The days of “stated income” by the self employed for rental properties are OVER. Make sure you discuss your goals with your Investor Specialist broker prior to investing. Make sure all your ducks are in a row during these difficult times.

Rental property mortgages can be very difficult to fund if you do not fit perfectly into the lending criteria. Remember that lenders consider rental properties the highest risk for foreclosure proceedings. In their books, if a person has a rental property and a primary residence, they will let the rental property go into default before they will their own home. To prevent this from happening, they mandate that the property MUST be insured by CMHC in order to protect their bottom lines.

Loan to Value’s
Lowest rates and amortizations — 65% loan to value will get you a mortgage without CMHC Insurance
Rates with premiums to the rate – usually .50% – will get you a mortgage without CMHC up to 80% loan to value

Keep these items in mind when considering rental property financing options.