All Forum Posts by: Huong Luu

I just started toying with the idea of moving to Montreal or Gatineau when we return to Canada from our extended trip. So I would be interested to meet others from that area too. 

@Chase Jipson Welcome to BP. To answer you questions, I am going to include them here:

Current plan is to put down ~$25k (first time home buyers). See if you and your partner can maximize on the RRSP first time home buyers. Since you are currently saving, it sounds like you have time. If you max on your RRSP, you will be able to recognize a tax deduction.  

Tad bit of a curveball here, we will be living in the home while renovating - Many investors and 1st time home buyers do this. This is not a curveball.

when beginning the refi process, how much will the bank give you? The banks will use their own appraisers and usually will come in under value as this is to protect them. The banks will usually lend you upto 85% of the appraised value (depending on your debt load). If you plan to refi within a few months, then you want to get a variable-open mortgage as some banks will charge you to break a fixed mortgage when you refi. 

Does it matter how much equity you currently have? The more equity you have, the more funds you will be able to access.

What are the factors? Does the refi amount simply get added to your mortgage? It can be. Depends on the bank. They might just offer you a HELOC for the increase. 

For now (could be totally off) let’s say the bank gives us enough for a down payment on another home. That is great. You still need to quality for a mortgage (on the other home). Your 1st property will now show as debt on your balance sheet. Some banks will use 50% of rental income, some use 0%. 

We buy the home, live in it while doing the Reno, and continue repeating this process, all while renting out the previously reno’d home. You will have to weigh out the pro and con. If you buy the place as a prim residency, you may be able to use the 5% downpayment over and over, but then the cost of buying and renos will not be a tax deduction. When you buy an investment property, all the cost and interest associated with that purchase is a tax deduction. 

Message me and I will send you the documents from my laundromat business. The important factors are

1. Tenants pay rent, utilities and all maintenance fees (this is called triple lease). Really, your parents should be cash flowing.

2. Rent increases are not capped once the term is up. So review the rents and increase them appropriately. Annual increases are documented in the lease. 

3. current mortgage and rate.

Paying taxes doesn't have to be painful. In Canada, we get so much in return (ie free community centers/programs, student assistance, etc). The way I see it, paying taxes is an indication of how well you are doing. You can minimize the taxes by making some strategic investments. Reach the passive income target your want. Don't let this be an excuse. Align this with the life style you want (ie travel more, work less, spend more time with family...). 

I am in the same position you are. What I decided to do is keep all the properties and leverage them (ie HELOC) and started buying properties outside of GTA and started money lending. From the sounds of it, you have already seen gains in your property. Are you leveraging that so if the market does go down you have already recouped your investment and making additional income from it? You can also position the property financially so that if the value goes down, you are able to still see a positive cash flow.

In addition, I am using the IFA (Immediate Funding Account) strategy to help pay for the capital gains. If you have kids or want to leave the properties to a charity, this might be something to think about.  

In addition to what was said above, keep in mind rates usually go up by 0.25%-1.0% at a time and at specific times will the Bank of Canada consider increasing it, so it will take several increases for you to see the $800/m increase you are fearing. If you have the $20K now to do the reno, and can recoup that back in 3-6 months (either through rent income and equity pullout), then it makes sense to do the reno now. Regardless if you are in a variable or fixed mortgage now, considering doubling up on your payments if you have cash so you can decrease the overall interest you are paying and when you refi, you should be able to access more equity via a HELOC.

I would agree with @Account Closed to not lend the HELOC out because if the loan goes into default you/your dad still have to pay the interest. When I do hard money lending, I only lend it to people you know and they must be investors. I will not lend to mom/dad that have gone into consumer debt. To protect you and your Dad,

1. Always get a collateral (ie property) on the money

2. determine who you want to lend the money to (ie only investors...)

3. determine the terms (ie duration (ie 6 months, 1 year...), rate..., position)

4. learn how to do your due diligence on who you lend to (you can do this yourself or work through a broker)

5. get legal documents

If your Dad is lending you the money, then it doesn't need to be so legal (although recommended). He should report the interest he makes from you on his personal taxes (along with any profit you give him) and write off the interest he is charged on the HELOC. You as well, would write off the interest paid to your Dad. The bank will not care or ask questions about what is he doing with the HELOC. I would suggest you read up on the Smiths Maneuver. There are some rules and regulations about hard money lending (keep in mind this also falls under contract law).

If you and you Dad use the HELOC to buy a flip/BRRR that's different. You can message me and I can give you more info about hard money lending.

@Colton Potter if you are planning on doing reno, then the cost of reno should be part of your calc. Figure out what the average price per door is for good place then back calculate for the property you look at. Your MAO should allow for reno, property manager (even if you are going to do it yourself) and carrying cost. Don't just pick a price out of the air and make offers. You will waste your time and other peoples time. Also if you are taking 2 beds and making them into 3, the room size will be smaller and this may affect your rent potential. Also check what zoning/permitting requirements are needed to finish a basement in that area. This differs from city to city.

Prince Rupert is a good place to invest and have potential to grow. I have contacts there if yo need (just msg me).

@Leandro Zhao As part of your offer to buy, you can negotiate a vacant building as a condition. If the cash flow doesn't work with the existing tenants, then you might want to look at another place. Read up on the landlord and tenant requirements to evict tenants. In Toronto, you have to give tenants 1 month rent rebate, if you evict them regardless of reason. I have long term tenants in Toronto(some for 15 years...) so I feel the pain every month when the rent increases are only 1.2-2.3% per year. So you have to stay on top of increasing rent every year. Keep in mind, these tenants are your clients, they are helping you pay down your mortgage so there are pros to long term tenants. 

There are areas where there is no rent control like Alberta. So if rent control is your concern, then look in those areas. 

@Randy Holdaway I jumped right in with my 1st property as a MF. This was 20 years ago. I had no idea what I was doing and had no family or mentorship. I now also have some SFU. From personal experience, the SF houses that have multi units are great b/c the cashflow works better. 

Keep in mind, there is good debt. When I started out, I had a $45K OSAP loan. I paid that off in 2 years. Looking back, I should have taken my time on that debt as it was at 1-2% interest. 

If you are starting out, and don't have enough funds, see if you have friends who will join forces with you. Many of my new clients are finding it hard to get their 1st positive cash flowing properties in Toronto, so teaming up with family and friends may be an option. Good luck.