Investing in real estate is a popular wealth-building strategy for many Canadians. Whether you’re considering purchasing your first investment property or expanding your existing portfolio, understanding the ins and outs of investment properties and mortgages in Canada is crucial.
In this article, I get into what you should know before diving into the world of real estate investment.
Investment properties offer numerous benefits to an investor. From generating passive income to building equity over time, real estate can be a lucrative long-term investment.
There are various types of investment properties to consider, including residential rental properties whether it’s a single family home, buying a second home and renting out your first, buying a duplex or multi-family home, or even commercial real estate.
One of the most significant factors to consider when investing in real estate is financing. While some investors may have the capital to purchase properties outright, many rely on mortgages to leverage their investments. Let me help you understand how mortgages work in the context of investment properties.
When you have decided that you’re ready to purchase an investment property, please reach out to me. As a mortgage broker, we can discuss your situation and the property you’re after. I work for you, and the bank pays me, so I have your best interest in mind. Always!
Together we’ll decide on whether a conventional mortgage works, or if you’d need a private mortgage or even a commercial mortgage.
There are several different mortgage loan options available for investment properties depending on your financial portfolio and whether or not you own other properties already.
When purchasing a second home, you may do as little as 5% down payment if you only own one or two other properties that you put less than 20% down on. This is because depending on the lender and insurer, they will generally only want you to have 2 or possibly max 3 properties total where you have put less than 20% down on. Otherwise, you would need to do 20% or more down payment on a property. If you do 20% down or more, most lenders will allow 5 total properties with some allowing more total.
Once we determine what type or mortgage you qualify for, we’ll discuss rates and amortization periods.
Fixed vs. Variable Rates: Investors must decide between fixed-rate and variable-rate mortgages, each with its pros and cons. When you reach out to me to discuss your situation, we can discuss the current rates and what you qualify for.
Amortization Periods: Choosing the right amortization period can impact monthly cash flow and overall investment returns.
Finally on my end of things, it’s the qualifying process!
Lenders will assess your income and credit worthiness when considering your mortgage application. Some lenders may factor in potential rental income when determining your eligibility for a mortgage on an investment property. We will go through everything you need to provide me in terms of qualifying for the mortgage and I’ll make it as easy and painless as possible for you.
Once we know that you’re qualified and good to go, you’ll get the green light from me to make an offer on the property you’re after. It’s a smart idea to wait until we know what you qualify for before you put an offer in. It allows a smoother real estate transaction and you won’t get your hopes on a certain property if you don’t qualify!
From my experience, here are some things to consider when planning to purchase an investment property.
Location, Location, Location
Research potential investment locations thoroughly, considering factors such as rental demand, property appreciation, and economic growth. If you’re local to Kelowna, consider West Kelowna or even Vernon.
Cash Flow Analysis
Conduct a thorough cash flow analysis to ensure your investment property will generate positive cash flow after accounting for expenses such as mortgage payments, property taxes, insurance, and maintenance.
Investing in real estate can be a rewarding venture, but it requires careful planning and consideration, particularly when it comes to mortgages for investment properties in Canada. By understanding your mortgage options, you can maximize the returns on your investment properties and build long-term wealth.Reach out to me today to get started on securing your next investment property. The sooner we talk and go through your situation, the sooner you’ll be approved and ready to put in an offer! Give me a call at 250-826-3111, apply on my website or contact me through my online contact form to start the process today.
Let’s get your application off the ground.
