All Forum Posts by: Neil Da Silva

Hi Neil. Not sure if there are other factors in Canada that would differ from U.S. in terms of analysis, however I would put the numbers in the BP Rental Calculator to see what the yields are. Looks like it doesn't pass the 1% rule. However, to have a clear picture of the potential, factor in all the numbers. Taxes are going to eat up close to 3 months income, and that's before any financing costs. 

@Neil Da Silva

Once you have settled the matter of potential mortgage fraud, it becomes strictly a mathematical question ;-)

With a 5% downpayment you will be paying an insurance rate premium of 4.00% of the loan value (it will be added to the principal of your mortgage, so you will pay interest on top of it).

If your rate of return is better with the 5% down payment than a 20% down payment, then it's the right move.   If you cannot afford to make a 20% downpayment or you need to save capital for rehab or another deal, then making a downpayment of 5% (or 10% ... which would be an insurance premium of 3.10%) may be necessary.

@Neil Da Silva

The most common mortgage financing terms are 5-years or 3-years. If your LTV ratio is 80% or less at the end of the first term, then you can refinance with a conventional mortgage. Unfortunately, you have already paid the full premium for the insurance - a cost of doing business that that point.

As for affecting your deal, on a residential property, the impact of a lower (10% or 5%) downpayment coupled with the insurance premium, typically has a negative impact on the free cash flow of the property due to the higher debt service.   If you obtain a significantly better interest rate due to having insured financing - not something you frequently see with residential lending - the impact on your cash flow will be mitigated.

Hello @Neil Da Silva

I would say Windsor ON because you can still find many properties which can cashflow, ROI 8 - 12%, Good Appreciation(just this year 6 10%), very low vacancy rate(currently I would 0%) and finally, currently windsor is one of the fast growing cities in Canada

Just to give you an Idea of number in Windsor 

I purchased a duplex on march 1st 2017 for 102k, after renovation 125k

Current ARV 160k+

Total per month (unit 1: 1000 + & unit 2: 650+)

Cashflow: after all expenses 300 - 400$ 

ROI: 10%

Rented with in 3 days after posting a kijiji ad(ad viewers 600+, 30+ replies) which shows there's high demand for rental

@Neil Da Silva

If you read the rules around CMHC {or privately} insured, high-ratio mortgages, you will see that they are for owner-occupied properties and that there is a certain window within which you are to take-up residency in the property.

If you secure such a high-ratio, mortgage and do not take-up residency - and never had the intention of taking-up residency - you will have committed mortgage fraud.   Whether the lender or insurer actually follow-on and "catch" you is another matter, but the possibility of unpleasant consequences is there.

Another thing to consider is that you may only hold a single CMHC insured high-ration residential mortgage at a time.  If you apply and secure one for this property, you are technically ineligible for another secured mortgage until the first property has been sold or re-financed under a conventional mortgage.