Peterborough , Ontario · Member since 2015 · 111 posts · 15 votes
Hi all
I am wondering if seller financing works the same in Canada, mainly Ontario. I have a dinner few properties in mind, "not even sure if the sellers will be interested". Just looking for anyone experience in Ontario...
I am wondering if seller financing works the same in Canada, mainly Ontario. I have a dinner few properties in mind, "not even sure if the sellers will be interested". Just looking for anyone experience in Ontario...
Thank for any help!
Lee
Yes, a vendor carry is possible in Canada (Ontario or any other province). A more detailed answer will depend on several factors:
Are you looking for the vendor to carry the entire mortgage, or just a portion;
Are you looking at residential (1-4 unit) or commercial (5+ unit {multifamily}, office, etc);
How much are you bringing to the deal?
In the case of a 100% vendor carry, this is a mortgage and note between you and the vendor. I would have the papers drawn-up / vetted by an experienced real estate attorney just the same. A full vendor carry is like a blue lobster - they exist, but are few and far between.
If you are buying a residential property and are using a conventional lender, they may not be crazy about vendor financing (the underwriters mostly service Dick & Jane and do not see such things very often .... and do not like different). Those who allow it, will likely still expect you to bring 20% to the table. If you are buying commercial, the lender will be familiar with vendor financing and will likely allow 10-15%+, provided you bring a 10 - 15%+ downpayment.
I am wondering if seller financing works the same in Canada, mainly Ontario. I have a dinner few properties in mind, "not even sure if the sellers will be interested". Just looking for anyone experience in Ontario...
Thank for any help!
Lee
Yes, a vendor carry is possible in Canada (Ontario or any other province). A more detailed answer will depend on several factors:
Are you looking for the vendor to carry the entire mortgage, or just a portion;
Are you looking at residential (1-4 unit) or commercial (5+ unit {multifamily}, office, etc);
How much are you bringing to the deal?
In the case of a 100% vendor carry, this is a mortgage and note between you and the vendor. I would have the papers drawn-up / vetted by an experienced real estate attorney just the same. A full vendor carry is like a blue lobster - they exist, but are few and far between.
If you are buying a residential property and are using a conventional lender, they may not be crazy about vendor financing (the underwriters mostly service Dick & Jane and do not see such things very often .... and do not like different). Those who allow it, will likely still expect you to bring 20% to the table. If you are buying commercial, the lender will be familiar with vendor financing and will likely allow 10-15%+, provided you bring a 10 - 15%+ downpayment.
I am actually looking at both styles of properties.
A 4 plex in the local city i am from "Peterborough" listed at $620,000 with a potential income of $51,000, NOI of approx $25,300 per year...not including the mortgage. which doesn't leave much for any kind of mortgage in the 600's.... The owner is a live-in, so not sure if the list price is actually based on being an investment property... They estimated 2 of the units income... I believe may be a little on the high side.
The second is an 11 unit - 7 res, and 4 Office/store fronts, 20 min outside of peterborough, is listed for $425,000, with an income of $61500 and NOI of $19,500 /yr... not including the mortgage.
Both owners are looking at getting out of the business / retire... I am looking into purchasing for the long turn, the BRRR strategy.
In a perfect world, I would like 100% vendor financing... long shot I would say. As for what I am bring to the deal, Not too sure... obviously some type of interest rate for the financing, my back ground with doing rentals / land lording... As for the 10-20% down payment, I am looking to do some type / version of the No Money down...
The area i am looking at has a university, and a college, which brings in many students. And for the area, there is no short supply of tenants.
Well, took a look at the first property. It's pretty nice! I still am not sold on the income being able to support the expenses "mortgage"... but for sure the potential rental income is good. The owner even wants to stay and rent out 2 units for the next few months...
Down side, no go for seller financing. The owner wants out of the business all together after 30 years, he is ready to hide in a boat fishing and retire.
I think it's time to work on my creative financing!!
Also, @Roy N. When you mentioned what am I bringing to the deal... I've been thinking about it all day.. and truthful, I think I went at answering it wrong... I don't really know what I can bring. Would you or anyone have any suggestions on what there is to bring into a deal? Or let me know if I was on the right track?
Not knowing is actually a good thing ... it means you are thinking, rather than assuming you have {all the} answers.
First, I'll let you know upfront that I and my partner are far from authorities on creative financing - if successfully closed deals are the benchmark. @Brian Gibbons' writings and ideas would be a good read for you ... keeping in mind, he's U.S.A. based. For some reason, Canadians - or, at least, Maritimers - appear less inclined to opt for "vendor financing" let alone anything truly creative.
IMHO, your primary objective in a "deal" is to solve/satisfy the vendor's problem/need. Scoring a property at a reasonable price is a happy byproduct of a content vendor.
In your case-in-hand, the Vendor wishes to exit the rental business ... and he want's his money, now. The unanswered question is: Does he need all his money now? How much could he save in income taxes (if any) if he were to carry a portion or all of the mortgage note and defer his capital gains over 5-years?
Thanks for all the information @Roy N. I will start taking a look at @Brian Gibbons writing and ideas.
As for the vendor on the 4 plex. He has been using it as a owner occupied for quite some time. so i think he may not be to worried about the income tax advantages. Always worth asking though!
So I took at look at property #2 the other day. Its an 11 unit, both multi family and 4 store front units. Yearly Rental income of $60k, operating expenses aprox $30k. Listed at $425,000. The BP Rental Calc has it at a 7.3% Cap Rate.
The Realtor and owner showed me thought the building, crazy thing happened. within the first 10 minutes of meeting, the Realtor let me know that the owner is 78 years old, motivated, and is ok with doing some type of vendor lending? He was referring to a down payment... since it would probably need to be 35% or something.. But I am going to be asking if he is interested in doing 100%
Its an old building that was partially condemned, upper floors. So an investor purchased it in 2006, and did a complete gut and rebuild. So, everything is up to day... i believe. Finishing work is not class "A", but is decent, definitely an older small town feel. There is lots of room for improvements!... Good thing i guess. Being an older building i have some concerns. Whether it has any historical restraints on the property. The Seller property paperwork states that the property is under Otonabee Region Conservation Authority.... will have to look into that. And i guess if there are any known future mandatory changes upgrades needed to meet any local / provincial bylaws...
For your second property we call them "heritage" in Toronto. Because there are restrictions on changing the property structurely etc.. A lot of Victorian homes cannot be demolished or even walls be torn down...
I would be very careful in investing in these types of property. Make sure you do your due diligence and know what the restrictions are. The current seller may have issues with saleability hence offering seller financing..
@Amy Colin I found the one property - 11 unit apartment building, on mls, under commercial, and just emailed the Realtor.
And for the 4 plex, a wholesaler, I think that is what he is... responded to one of my adds i put on Kijiji. one of the 22 1/2 things to do podcast. I have actually had multiple responses from many people, lots of single family homes - looking for full list price though...
Also, i just google, my local area, and type in multi, plex, apartment building, commercial for sale... you never know what you will find!
I will be aiming for some type of creative financing, and exploring any friends and family who may be interested, then build from there... I proposed a 100% seller financing to the owner of the 11 unit. He is willing to do $100,000 2nd, so approx 25%... My brokers, private investor, might be interested in doing a 1st Mortgage. Still crunching numbers.
How do you finance your deals?
I am still in the early phase. I've owned 1 property for the last 10 years. I am finally looking to building my portfolio, BP has given me much inspiration to strive into the next stage of the game!
We've been going the traditional mortgage route. We buy properties that need work, fix it up (forced appreciation) then get a LOC on the house which enables us to pull out our down payment and buy another one.
We've done that with 3 properties but now we're tapped out, mortgage wise.
So exploring alternate financing options. BP has definitely opened our eyes to all the options out there, so looking for a property or two to implement some creative financing.
Owner financing is very common in Canada.they are also known as Vendor take back mortgage.Get advice or training from Canadian creative financing expert and save yourself ton of money.
Well, the 11 unit apartment building, the owner is willing to do $100K vendor take back mortgage as the down payment. my broker is looking into the details from her private financing partner, probably only 65%...
The numbers get a little squirrelly with the 100% financing as the $100K will not be enough to meet the 35% down. Will be looking into seeing if the owner will up his limit...
Getting excited, but I need to keep my head straight, as the deal might not work well.
Good find! I would recommend having a very educated home inspector or structural engineer do your inspection, heritage buildings are tricky and have hidden issues. go the extra 10%, if you think its a great deal and the DP is holding you back. Consider a JV to raise the additional cash.
Thanks for all the info guys! Will be taking it all into consideration!
I will keep you all posted.
@Lee Jackson - I'm New to BP and stumbled across this thread and I'm intrigued to find out how things went... We're you able to set up a creative financing strategy? I've come across a few properties that seem to be good investments but coming up with the 20% DP in the GTA where prices are so high can be difficult. .. would love to hear how things turned out for you.
Thanks for all the info guys! Will be taking it all into consideration!
I will keep you all posted.
@Lee Jackson - I'm New to BP and stumbled across this thread and I'm intrigued to find out how things went... We're you able to set up a creative financing strategy? I've come across a few properties that seem to be good investments but coming up with the 20% DP in the GTA where prices are so high can be difficult. .. would love to hear how things turned out for you.
Hi Shallen
As of right now I'm just looking it all over. The current owner of the 11 unitapartment building has offered almost 30% down... My mortgage broker informed me that her private investors would probably what 35% down... so I'm still crunching to see if the numbers work.. or if it's still to much. One the thing about pretty much paying 100% financing between 2 mortgages. Still gotta make the numbers work. I think my next step is going back to the owner to see if he is willing to load more or not.. or put his price down. Will see.... not going to rush it as I have lots to look into. Also, how to get any inspections or appraisals paid...
I'll try to keep you posted thanks for the question
Lee Jackson
Did this deal ever go through? Have you done any others. We found an opportunity and are looking into some type of seller financing. Just looking to see what others have done.