First Rental Property

Hi Friend,

I hope that you are doing well.

I get asked a lot of questions from new real estate investors who are looking to purchase their first rental property.

A question that I get asked on occasion is:

“How do I buy a rental property?”

When I was first starting out as a real estate investor over 7 years ago, I had a limited understanding of how to finance my first rental property.

With the knowledge that I have gained since then, I have gone on to purchase Oakville real estate, Hamilton real estate and Toronto real estate.  Most importantly, I have been able to successfully finance all of these purchases.

There are different methods in which you can finance a rental property.  However, the most important method in my opinion is the method in which you leverage your principal residence.

How to Leverage Your Principal Residence

Mortgage and financing rules are different depending upon which country you live in.  In Canada, you were once able to leverage your principal residence to 80% of the Loan To Value (LTV).

Let’s look at an example to help illustrate this point:

Example

You own a home and the value of that home is $500,000.

You have an existing first mortgage on the home in the amount of $100,000

If you take 80% of the value of your home, you get a figure of $400,000 ($500,000 * 80%)

This means that if you get your bank or lender to place a ‘secure line of credit’ on your home, you used to be able to get 80% of the LTV.

Meaning that the maximum ‘loan’ that your bank/lender would be willing to place on your home would be $400,000.

So now, if you place a secure line of credit on your home, the maximum amount here would be $400,000.

However, you must also remember that there is a $100,000 first mortgage on the property as well.

All this means is that you subtract $400,000 by $100,000, which equals $300,000.

$300,000 is the amount of a secure line of credit that you would be able to get.

*Note:  80% LTV used to be the guideline in Canada.  There have been recent mortgage rule changes implemented by the Federal Government which have changed this value*

What Does This Mean?

The bottom line as to what this means is that you now have $300,000 to invest in real estate.  This $300,000 can be used as a down payment towards your first, second or third rental property.

Once you have figured out where your down payment will be coming from (you just have), you then have to obtain a 1st mortgage for your rental property.

All things being equal, mortgage brokers in Canada are able to grant multiple mortgages to an individual.  The Big Five Banks in Canada, are limited as the the number of mortgages that they can issue to an individual.  Therefore, the mortgage broker industry often services real estate investors who are purchasing multiple properties.

In Summary

Lots of new real estate investors stress out as to where to find the money to buy a rental property.  For many of them that own a principal residence, chances are is that your potential down payment was sitting there all along.  You just need to know how to uncover it, by properly leveraging your principal residence.

Happy Investing!

Neil Uttamsingh

ps: Remember!  I am an experienced real estate investor and Licensed Realtor.  I help new real estate investors like you purchase your first rental property.  If you are looking to purchase Oakville real estate, Hamilton real estate or Toronto real estate, send me an email at NEIL@FIRSTRENTALPROPERTY.COM and I will help you get started!

Hi Friend,

I hope you are doing well.

I am constantly asked by new real estate investors to:

“keep them in mind”

If I come across any…

“good deals”

Well this is one of those times.

For those of you that have asked me to “keep you in mind”, I am returning the favour.

Below are some details in regards to an investment opportunity in Toronto.  If you live in Toronto, or live in other parts of the world and are looking to invest in Toronto real estate, consider this opportunity.

If you are looking to buy your first rental property, and have the funds to invests, this option might be right for you.

As an experienced real estate investors and  Licensed Realtor, (with connections I might add), I have access to pre-construction condo units that are selling below market value.  Key word here is… below market value.

If any of the details below interest you, send me a message at NEIL@FIRSTRENTALPROPERTY.COM for further details.

Here are the details below:

A One Night Only VIP Condo Event you will not want to miss!
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One Night Only This Thursday November 29^th at 7pm

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VIP Prices from $241,900

Own or Invest with Positive Cash Flow from Day One!

It’s Downtown’s Hottest and most Desirable area. King West Village is filled with critically acclaimed restaurants, spectacular night life and the TTC out your door step. Located between Bathurst and Spadina, King West Village runs to the North and South sides of King St. It’s where the action never stops!

7PM Sharp

Thursday November 29^th, 2012

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Priority Registration

111 Bathurst Street, Toronto M5V 2R1

(corner of Bathurst and Adelaide)

To Register reply to: NEIL@FIRSTRENTALPROPERTY.COM

Happy Investing!

Best Regards,

Neil Uttamsingh

ps: Remember!  I am an experienced real estate investor and Licensed Realtor.  If you are looking to buy your first rental property and would like to buy Oakville real estate, Hamilton real estate or Toronto real estate, send me an email at NEIL@FIRSTRENTALPROPERTY.COM, and I will get you started in the right direction…

Hi Friend,

I hope you are doing well.  As a new real estate investor, I know that you have many questions as to how to get started with investing in real estate.

One question that you may have on your mind is, ‘Where is the best place to buy a rental property?’

If you have that question on your mind, you are not alone.  In my experience, that is one of the most common questions asked by new real estate  investors.

When I first started as a real estate investor, I did not know where exactly I should be purchasing my first rental property.  I ended up purchasing Oakville real estate, and have since gone on to add to my portfolio by owning Hamilton real estate and Toronto real estate.

Another very important questions that is asked by new real estate investors is:

Is The Cheapest Property Always The Best Deal?

My answer to this questions is:

It depends…

It depends on a couple of important variables, and these variables are…

1) The tenant profile 

and

2) The condition of the property

The Tenant Profile

Some new real estate investors are attracted to buying the ‘cheapest’ property in a given city of town because they have a limited down payment.  More often than not, when you are started out as a real estate investors, you do not have lots of money to put down towards a down payment.  Some people begin to think that in order to ‘get into the game’, they have to buy the ‘cheapest’ property because they are limited by how much money they have to put down.

This is the wrong mode of thinking. Just because a property is ‘less expensive’ than others, does not make it the best option for you to purchase.  In many real estate markets, the ‘cheapest’ properties have the most challenging tenants.  Cheap properties bring with them cheap rents.  When you have ‘cheap’ rents, you can very possibly have high maintenance, and difficult tenants to deal with.

If you are limited by how much money you have as  a down payment, never make the error in purchasing a ‘cheap’ property simply because that is your only ‘option’.

The condition of the property

All things being equal, cheap properties are cheap for a reason.  The fact that they are less expensive can stem from the fact that they are in poor condition.   You should avoid buying  a rental property, and especially your first rental property if it requires massive repairs and maintenance.  Cheap properties require work to be done to them.  Unless you have lots of experience with repairs and maintenance on properties, avoid buying one that is in poor condition.

In summary

The lesson to learn here is as follows:

If you are a new real estate investor and you have a limited down payment for the purchase of your first rental property, don’t rush the process.

Do not feel that ‘in order to get into the game’ you have to purchase the cheapest rental property out there, because that is all you can afford.

Take special note that with ‘cheaper’ properties you purchase, other issues arise.

Cheapest is not always the best.

Happy Investing!

Best Regards,

Neil Uttamsingh

ps: Remember, I am an experienced real estate investor and Licensed Realtor.  I help new real estate investors like you purchase their first rental property.  If you would like to buy Hamilton real estate, Oakville real estate or Toronto real estate, send me a message at NEIL@FIRSTRENTALPROPERTY.COM and I will help you get started.

Hi Friend,

I hope you are doing well.  One of the most common questions I get asked by new real estate investors is,

‘Where should I buy a rental property?’

When I was first starting out as a real estate investor, all I knew was that I wanted to buy Oakville real estate, and that was about it.  I did not know any other details other than that.  Since then, I have expanded my real estate portfolio and I own Hamilton real estate and Toronto real estate as well.

If you are a new real estate investor and are wondering where YOU should buy your first rental property, you need to read this blog post.

The simple answer to this question is:

“It depends”

In my mind, it depends on 2 major factors…

These factors are:

1) Where you live 

and

2) How much capital you have to invest

Where you live

My answer to all new real estate investors is the same.  My answer is, “Buy a rental property close enough to where you live so that you can self manage the property’.  This does not mean that you have to buy your first rental property in the same city or town you live in.  The property you purchase can be in a neighbouring city or town.  The most important thing to consider here is that the property needs to be close to you so that you can manage it YOURSELF.

How much capital you have to invest

This is a tricky point because a lot of new real estate investors don’t understand this concept right off the bat.  Depending upon how much capital you have to invest will definitely influence where specifically you invest.  Here is a clear example to help illustrate this point:

CASE STUDY

You have $100,000 to invest in a rental property and are trying to determine between 2 towns, which is the better town to invest in.  The towns are, Town A and Town B.

Town A

Town A has rental properties that cost on average $500,000.  The appreciation of properties in Town A year over year have averaged 7%. The tenant profile in Town A is low maintenance and the type of tenants that rent are professionals earning above average incomes.

Town B

Town B has rental properties that cost on average $150,000.  The appreciation of properties in Town B year over year have averaged 3%.  The tenant profile in Town B is high maintenance.  The type of tenants that rent are individuals with sub par credit history.

If you are a new real estate investor, take note.  You invest your money in Town A.

You invest your money in Town A because…

• You will have ‘easier’ tenants to manage, and,
• You will experience greater property appreciation.