25 M earning 70k wants to invest on first property
Member since 2023 · 1 post · 0 votes
25 M earning 70k wants to invest on first property
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Quote from @Sami Ibn Jamil:
Hi guys, im a new grad 25yo M, living in Milton and working in Guelph. I earn about 70k per year. I am interested in investing on my first property. Any suggestions how do i start with? My current rent is about 1200, how much down payment do I actually need? What should be my budget? What should be a location? I dont have much saved, what options do i have to save the down payment. Can my parents gift me some money? How does that work legally ? I am also interested in vacation homes which i can airbnb out. Wher efo i look fornit and anyone who can be my mentor?
Let's see if I can answer your question as a fellow Canadian. Milton and Guelph are not cheap markets where your salary can qualify for much. My first suggestion is you have to work on getting your income up higher to around at least 100k per year. You are young so you can definitely do it. When I was 25 I was making 52k working for PwC, by the time I was 30 I hit around 100k. So focus on your earning potential, this will impact how much debt/leverage you can get (ie. how much money the bank is willing to lend you).
For down payment in Canada, for a owner occupied property the minimum down payment is 5%. You will have to pay for CMHC (or equivalent) insurance on the mortgage at sub 20% down payment. For investment property, it is usually 20% down minimum (due to the fact these mortgages are not insured).
Your budget and location is up to you and what your goals are. As well as how risk tolerant are you. All this is going to be something you have to figure out for yourself. I'm happy to chat with you more if you want my experience.
Your parents can definitely gift you some money for down payment. I think like 1/3 of Canadian first home buyers get a gift of some sort (this number is probably wrong, but it is a very high number). The gift will basically be a gift. Your parents will have to sign a gift letter declaring to the bank that this money is a gift and there is no expectation of repayment. This is a fairly standard practice in Canada and you shouldn't have any issue with that.
For Airbnb (or any STR), you should treat it as a business. It is quite different from long term rentals. Airbnb/STR are much more active and you have to be involved in the day to day on a pretty frequent basis. If you want to hire that out, companies usually charge 20% to 30% of the nightly rate (from my own research, your area might be different). This is eat into your profit margin significantly. As well vacation homes are typically seasonal and the best times when you want to use the vacation home is also when everyone else want to go there. So it is likely that you will not be able to enjoy the best vacation seasons. During the off season your mortgage doesn't stop, so you'll have to either save money from the peak season to cover or come out of pocket.
As you can probably tell, the Canadian real estate market is drastically different than the US. There will be a lot of information on here that does not apply for Canada, which is unfortunate.
TLDR
1) Focus on your earning potential, get your income to 100k and above
2) Figure out where you want to invest and what you can comfortably afford to invest
3) Gift from parents is very common in Canada and basically it will need to be a true gift
4) Know what you want to do with real estate (ie. is this going to be your main job/business, or a side hustle)
Good luck and feel free to reach out if you want to chat more!
8 Replies
- Roseville · Member since 2022 · 35 posts · 14 votes3y
Hi Sami,
My suggestion for you would be to use the strategy House Hacking. As David Greene says he believes that this strategy is the most powerful. This will allow you to get your first property with a little down payment such as 3.5% FHA or 3% Conventional loan. For your DTI (Debt to Income) ration you want to stay below 28% of your total income. In regards to your parents gifting you money I don't see any issue but I would ask your lender to clarify what requirements they may have for you. The one piece of advice I hope you run with is "to get used to being uncomfortable because thats where the money's at". Continue to educate yourself listening to podcasts and reading books. After doing these you will be ready to buy your first home. Don't get stuck in analysis paralysis once you start looking at properties trying to find the right one, start to make offers. Hope this helps you out! Feel free to reach out anytime!
- 3yBrittany MinocchiBusiness MemberLender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
Hi @Sami Ibn Jamil!
If you’re open to house hacking, that’s a viable option. You could live in one unit of a multifamily property and rent the others out, using that rental income to offset your mortgage payment.
As far as a down payment, you could do at little as 3.5% with a house hack, 15% for a single family investment property or 25% for a multifamily property you don’t intend to occupy.
Your budget is something you’ll have to crunch some numbers to figure out….none of us know how your income and debts break down. You may be able to use gift funds depending on the lender and loan program.
There are many locations that could be viable options depending on whether you decide on LTR or STR. Where I am in the Midwest, long term rentals are popular and the cost of entry isn't terrible. Feel free to reach out if there's anything I can help with!
Brittany Minocchi - Barrett Financial Group, LLC520 Reviews - Real Estate Agent · UT · Member since 2023 · 18 posts · 6 votes3y
Yes your parents can gift you some of the down payment. If you go with an FHA loan, the requirement is 3% down payment, however many states have Down Payment Assistance programs to help first time home buyers. Find an amazing lender who can help you get the most out of your first mortgage.
And I agree with the above comments, if you can find a home where you can house hack and have renters help you pay your mortgage, that is the best option. Then after a year, move out, buy another home and rent the first home.
- Member since 2023 · 4 posts · 2 votes3y
Guys ^^^^ everyone please don't give young Sami any false hope.
Ontario/GTA/Canada is a horrible market for anyone trying to get into Real Estate. We do not have any programs as there are in the states.
A shoe box costs a $1 million. Your will maybe cash flow at 15% LTV. Not an exaggeration.
Sami I would recommend you look south of the border in the US. I haven't done any deals there but the more I look the better the numbers make sense. - Its 5% down for owner occupied and 20% down for investment properties in Canada. And no assistance programs. A typical 1 bedroom condo starts at $700K in some Canadian cities, probably closer to $300K where he lives.
Quote from @Shanea Fulks:
Yes your parents can gift you some of the down payment. If you go with an FHA loan, the requirement is 3% down payment, however many states have Down Payment Assistance programs to help first time home buyers. Find an amazing lender who can help you get the most out of your first mortgage.
And I agree with the above comments, if you can find a home where you can house hack and have renters help you pay your mortgage, that is the best option. Then after a year, move out, buy another home and rent the first home.
Quote from @Sami Ibn Jamil:
Hi guys, im a new grad 25yo M, living in Milton and working in Guelph. I earn about 70k per year. I am interested in investing on my first property. Any suggestions how do i start with? My current rent is about 1200, how much down payment do I actually need? What should be my budget? What should be a location? I dont have much saved, what options do i have to save the down payment. Can my parents gift me some money? How does that work legally ? I am also interested in vacation homes which i can airbnb out. Wher efo i look fornit and anyone who can be my mentor?
Let's see if I can answer your question as a fellow Canadian. Milton and Guelph are not cheap markets where your salary can qualify for much. My first suggestion is you have to work on getting your income up higher to around at least 100k per year. You are young so you can definitely do it. When I was 25 I was making 52k working for PwC, by the time I was 30 I hit around 100k. So focus on your earning potential, this will impact how much debt/leverage you can get (ie. how much money the bank is willing to lend you).
For down payment in Canada, for a owner occupied property the minimum down payment is 5%. You will have to pay for CMHC (or equivalent) insurance on the mortgage at sub 20% down payment. For investment property, it is usually 20% down minimum (due to the fact these mortgages are not insured).
Your budget and location is up to you and what your goals are. As well as how risk tolerant are you. All this is going to be something you have to figure out for yourself. I'm happy to chat with you more if you want my experience.
Your parents can definitely gift you some money for down payment. I think like 1/3 of Canadian first home buyers get a gift of some sort (this number is probably wrong, but it is a very high number). The gift will basically be a gift. Your parents will have to sign a gift letter declaring to the bank that this money is a gift and there is no expectation of repayment. This is a fairly standard practice in Canada and you shouldn't have any issue with that.
For Airbnb (or any STR), you should treat it as a business. It is quite different from long term rentals. Airbnb/STR are much more active and you have to be involved in the day to day on a pretty frequent basis. If you want to hire that out, companies usually charge 20% to 30% of the nightly rate (from my own research, your area might be different). This is eat into your profit margin significantly. As well vacation homes are typically seasonal and the best times when you want to use the vacation home is also when everyone else want to go there. So it is likely that you will not be able to enjoy the best vacation seasons. During the off season your mortgage doesn't stop, so you'll have to either save money from the peak season to cover or come out of pocket.
As you can probably tell, the Canadian real estate market is drastically different than the US. There will be a lot of information on here that does not apply for Canada, which is unfortunate.
TLDR
1) Focus on your earning potential, get your income to 100k and above
2) Figure out where you want to invest and what you can comfortably afford to invest
3) Gift from parents is very common in Canada and basically it will need to be a true gift
4) Know what you want to do with real estate (ie. is this going to be your main job/business, or a side hustle)
Good luck and feel free to reach out if you want to chat more!
@Sami Ibn Jamil- hi there - begin the loan pre approval process and ask all these basic questions to the lender you choose to work with
- Real Estate Agent · Guelph, Ontario · Member since 2023 · 7 posts · 0 votes3y
Hey Sami!
There is a lot in this post and many answers, I wanted to reply and see if anything was still left unanswered or anything I can help with! I know this market is a handful!
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