Hi,

I am going to buy my first property in GTA!! My ultimate goal is to be a rental property investor. So, I want to position myself while buying first property in such a way that I can buy the second one as quickly (not more than 2 years of buying first property) and easily as possible and also want to leverage my first property for buying the second one.

My idea is to dwell and rent a part / basement of the property which I am going to buy first. I have the following questions,

1. What kind of properties should I be buying now in order to get equity of it quickly for my second property?

2. Is there a particular approach which I should take for mortgage ?

3. For example, if my first property is a detached house worth $750k. And if I wish to buy a condo as my second property for renting at $450k, then how can I have the downpayment for this condo within 2 years at most ?

Here's you approach.  Start with the future property you want to invest in, and work backwards. Reverse engineer your string of investments.  Not just for the next one after your first, but go all the way to the last...where you reach your goals...and start there and work backwards.  Base each entrance on the exit from that property leading into the entrance of the next.  Don't think small.

1. Value add property. Get some sweat equity in that first one!

2. If you can afford the down payment, go with a conventional mortgage so you can buy a distressed home.

3. Take the equity you gained from the first property, and use it to purchase the second one.

Good luck!

Hi Sethu,

You want to first get your education and know what you are doing.  I understand that you want to get started so your 2nd one will be easier. I agree that you learn the most by taking action and have real-life experience but you also don't want a setback.  Buying the first one incorrectly will really hurt you and delay your plans for a 2nd.

You want to have a calculated well-planned attack.  This way on your 2nd investment you will be even more dialed in.  Think "Art of War" my friend instead of just winging it.

I would do a multi family with FHA 3.5% down payment. Now, there are limits to how much you can spend and get an FHA loan. It is dependent on the county you live in. This will not necessarily get you a large amount of equity quickly, unless you find a value add property and can refinance within 2 years after improvements. And, you will need to live there for 12 months. But, this allows you to get in as cheap as possible, make some cash flow, and then save the rest of your money for the next deal.

Originally posted by @Brian Ellis :

1. Value add property. Get some sweat equity in that first one!

2. If you can afford the down payment, go with a conventional mortgage so you can buy a distressed home.

3. Take the equity you gained from the first property, and use it to purchase the second one.

Good luck!

I agree with what is stated above but I suggest this be a house hack or at least owner occupied. Why? Because when you extract the equity, the highest LTV is only available for owner occupied. if this is non-owner occupied you likely will be limited to 75% LTV (maybe even 70% LTV) which will hinder the "Take the equity you gained ..." part of this good plan.

Note after you have extracted the equity, you can turn it into rental or continue living there. The important part is to be able to extract as much of the equity as you can and owner occupied will allow you to extract more of the equity than if this were not owner occupied.

Good luck

Awesome! Thanks for reply folks. I live in Toronto and looking to buy property in Greater Toronto Area. The rules and regulations in Canada are a bit different than in the US.