Interesting situation here, starting to snowball with property. Thoughts comments, advice are all appreciated.
Bought my first single family at 18 for$69k and 5% down with CMHC insurance.
A year later, bought the second cosmetically distressed single family for 5% down with Genworth for $75k. I fixed it up, lived in/rented it for a year and sold for $110k.
With the proceeds, paid off an apprenticeship student loan, a quad loan, AND bought an Up/Down duplex for $235k, AGAIN, 5% down with Genworth Mtg. Ins.
4 years after buying my first property I have just sold a tent trailer, with the $5,000 non taxable income, I paid down the first mtg. To a point where I own more than 20%, intentionally doing so to reappraise the property and take out the available HELOC from forced appreciation.
With this new $5163 HELOC and an existing LOC for $20k I have an accepted offer on a foreclosed 2bed Condo rebuilt in 2013 that was valued by CMHC at $157,000. The accepted offer is for $94k. I plan to reappraise the property immediately after the purchase and buy a fourplex that I already have lined up for $225,000. The condo itself cash flows $225/mo.
This would take me from 3 to 8 units in a matter of weeks/months using none of my own money and without private investors or hard money lenders.
The cashflow on the fourplex will be enough to cover the Line Of Credit payments and then some.
I don't have any vehicle or toy payments so I will be putting $1000 personal cash to paying down the LOC's faster.
After around 1.5 years the LOC's will be at zero and ready to spend again, I'm thinking a 6plex will then be the next step.
What are your thoughts or experience with this strategy in Canada?
You've been rather fortunate with the 95% high-ratio mortgages - given they are intended for owner-occupants and you are technically only suppose to have one at a time. However, lenders - and the insurers themselves - do not seem to police them very well, so folks sometimes end-up with multiples. I would be prepared to a request to bring each one of them to 80% LTV when your financing renews ... it may not happen, but would be pain to get a capital call for which you are not ready.
The other thing to keep in mind is were are likely to see moderate upward movement in interest rates in the mid-term ... maybe not as far as the historical range of 7-9% ... but we are already seeing 4 - 6% on some financing. The higher you are leveraged, the more of a bite a rate increase is going to take from your ability to stay positively geared.
The older-guy view aside ... if your young and have an appetite for debt and are comfortable with the risks, working without a net will allow you to grow faster ... just be certain you have all the exits covered.
@Roy N. awesome advice. Greatly appreciated, the multiple high ratio mortgages were mostly strategic in my understanding that you can have one 95% LTV mortgage under each insurer.. I may be wrong there but it worked for me.
I was unaware of the possibility of having to bring them to 80% at the end of the term so I’ll keep that in mind, that’d be a BIG slap in the face.
I would have preferred doing a 20% down payment, but all I had was the 5% and the guts to risk making money through the equity and cashflow rather than saving that 20% myself...
That being said, the young and dumb in me says to jump in with both feet. If I could have 5Million in Real Estate debt, I’d do it today. The annual equity is key. After that equity builds up the next purchase comes faster and faster.
The bonus here is that I don’t have much to lose, if there were ever a time to jump in with both feet and fully leverage... I think it’s now! Thanks Roy!