Guide to Property Investment
Though there are many different ways of looking at investment properties, generally speaking there are two main focuses:
1. Profit on Sale: Buying a property and selling it for a higher price.
2. Profit from Rent: Collecting monthly rent as a form of periodic income.
The two of course are not mutually exclusive. Many people may rent out their investment property for a few years, and sell the property when the market is on an upswing. This is definitely a common strategy in Vancouver, as prices in our real estate market continues to rise, tempting investors to sell and realize a large profit.
The concept is simple, but keep in mind that any investment carries some form of risk. It is essential that you not only find the right investment property, but also understanding the risks involved.
We are here to help! Speak to our team; we have years of experience in real estate and financing that will help set your investment plans on the right track.
Rental Property Mortgaging
In April 2010, the federal government set a requirement to have a down payment of at least 20% for any non-owner-occupied residential rental property.
Purchase Price $700,000
20% downpayment $140,000 (required)
Many people do not have cash readily available to use as downpayment for an investment property. The typical solution is to borrow the downpayment by financing the equity in your own home. This can either be done as a mortgage or a line of credit. Many experienced investors will have a large line of credit readily available as a source of downpayment even before they looking for a new property.
2. Mortgage on the new property
Currently, most Banks or lenders will provide a mortgage for about 75% or 80% on the purchase price or appraised value.
When applying for the mortgage, the Bank or lender will hire an appraiser to review the investment property, and estimate a market value. He or she will also estimate how much rent the property would receive. You will be approved for the mortgage, as long as its shown that you can cover the mortgage payments, from the combination of your regular income and the estimate rent.
Using Your Home to Secure a Line of CreditIt remains that fact that a line of credit secured by your home is one of the cheapest ways to borrow money. It will have a lower interest rate than car loans and credit cards. Read more...
How Mortgage Helpers HelpBanks and lenders recognize separate suites as potential rental income, and will approve larger mortgages to homeowners based on the estimated market rent. Read more...
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